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Impact of Voucher Design on Public School Performance: Evidence from Florida and Milwaukee Voucher Programs

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  • Rajashri Chakrabarti

Abstract

This paper examines the impact of vouchers in general, and voucher design in particular, on public school performance. It argues that all voucher programs are not created equal. There are often fundamental differences in voucher designs that affect public school incentives differently and induce different responses from them. It analyzes two publicly funded voucher programs in the U.S. The 1990 Milwaukee experiment can be looked upon as a "voucher shock" program with a sudden Government announcement that the low-income public school population will be eligible for vouchers. The 1999 Florida program, on the other hand, can be looked upon as a "threat of voucher" program where the failing public schools are first threatened with vouchers, and vouchers are implemented only if they fail to meet a government designated cutoff quality level. In particular, a school getting an "F" grade for the first time is exposed to the threat of vouchers but does not face vouchers unless and until it gets a second "F" within the next three years. To analyze and compare the impacts of these two alternative designs on public school incentives and performance, I construct a theoretical model that captures the basic features of the two programs. It is an equilibrium theory of public school and household behavior where public school maximizes net revenue and households care about public school peer group quality in addition to public school effort. I use the model to analyze three alternative scenarios--a simple public-private system without vouchers, a Milwaukee-type voucher shock system and a Florida-type threat of voucher system. Providing micro-foundations to the public school payoff function, the model endogenously determines public school effort and peer group quality at each of the program equilibria. It yields three predictions. First, the effects of a Milwaukee-type program on public school effort and quality are ambiguous (where public school quality is a composite of public school effort and peer group quality.) Second, a Florida-type program will lead to an unambiguous improvement in public school effort and quality and third, these improvements will exceed the corresponding improvements (if any) in a Milwaukee-type program. Using school-scores data and a difference-in-differences estimation strategy in trends, the second part of the paper shows that these predictions are validated empirically. There is significant evidence of large improvement of the treated schools in Florida, but no consistent evidence of improvement of the Milwaukee treated schools. The findings are reasonably robust in that they survive several robustness checks including correcting for mean reversion. The design of the Florida program also enables a regression discontinuity analysis to investigate the impact of the Florida program. Interestingly, the results from this analysis strongly mirror those obtained from the above analysis. Thus both theoretically and empirically, the paper presents strong evidence that voucher design matters and in particular, the public school response under a Florida-type program is much larger than that in a Milwaukee-type program. The findings have important implications for public school reform, which are all the more relevant in the context of the present concern over public school performance.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 221.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:221

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Keywords: Vouchers; Incentives; Peer group quality;

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References

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  1. Rajashri Chakrabarti, 2009. "Do vouchers lead to sorting under random private-school selection? Evidence from the Milwaukee voucher program," Staff Reports, Federal Reserve Bank of New York 379, Federal Reserve Bank of New York.
  2. Thomas J. Nechyba, 2000. "Mobility, Targeting, and Private-School Vouchers," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 130-146, March.
  3. Rajashri Chakrabarti, 2007. "Can increasing private school participation and monetary loss in a voucher program affect public school performance? Evidence from Milwaukee," Staff Reports, Federal Reserve Bank of New York 300, Federal Reserve Bank of New York.
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  7. Chang-Tai Hsieh & Miguel Urquiola, 2003. "When Schools Compete, How Do They Compete? An Assessment of Chile's Nationwide School Voucher Program," NBER Working Papers 10008, National Bureau of Economic Research, Inc.
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  14. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, Econometric Society, vol. 69(1), pages 201-09, January.
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  16. Wilbert van der Klaauw, 2002. "Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression-Discontinuity Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1249-1287, November.
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  22. Elizabeth M. Caucutt, 2002. "Educational Vouchers When There Are Peer Group Effects--Size Matters," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 195-222, February.
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Cited by:
  1. West, Martin R. & Peterson, Paul E., 2005. "The Efficacy of Choice Threats within School Accountability Systems: Results from Legislatively Induced Experiments," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp05-033, Harvard University, John F. Kennedy School of Government.
  2. Jonah Rockoff & Lesley J. Turner, 2010. "Short-Run Impacts of Accountability on School Quality," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 2(4), pages 119-47, November.
  3. Rajashri Chakrabarti & Noah Schwartz, 2013. "Unintended consequences of school accountability policies: evidence from Florida and implications for New York," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue May, pages 19-44.
  4. Welsch, David M. & Zimmer, David M., 2012. "Do student migrations affect school performance? Evidence from Wisconsin's inter-district public school program," Economics of Education Review, Elsevier, Elsevier, vol. 31(1), pages 195-207.
  5. Chakrabarti, Rajashri, 2008. "Can increasing private school participation and monetary loss in a voucher program affect public school performance? Evidence from Milwaukee," Journal of Public Economics, Elsevier, Elsevier, vol. 92(5-6), pages 1371-1393, June.
  6. Chiang, Hanley, 2009. "How accountability pressure on failing schools affects student achievement," Journal of Public Economics, Elsevier, Elsevier, vol. 93(9-10), pages 1045-1057, October.
  7. Rajashri Chakrabarti, 2011. "Incentives and responses under No Child Left Behind: credible threats and the role of competition," Staff Reports, Federal Reserve Bank of New York 525, Federal Reserve Bank of New York.
  8. Rajashri Chakrabarti, 2005. "Vouchers, Public School Response and the Role of Incentives: Evidence from Florida," Public Economics, EconWPA 0512002, EconWPA.
  9. Ana Balcao Reis & Carmo Seabra & Luis C. Nunes, 2012. "Ranking schools: a step toward increased accountability or a mere discriminatory practice?," FEUNL Working Paper Series wp567, Universidade Nova de Lisboa, Faculdade de Economia.
  10. Rajashri Chakrabarti, 2011. "Vouchers, responses, and the test-taking population: regression discontinuity evidence from Florida," Staff Reports, Federal Reserve Bank of New York 486, Federal Reserve Bank of New York.
  11. Craig, Steven G. & Imberman, Scott A. & Perdue, Adam, 2013. "Does it pay to get an A? School resource allocations in response to accountability ratings," Journal of Urban Economics, Elsevier, vol. 73(1), pages 30-42.
  12. Ferreyra, Maria Marta & Liang, Pierre Jinghong, 2012. "Information asymmetry and equilibrium monitoring in education," Journal of Public Economics, Elsevier, Elsevier, vol. 96(1), pages 237-254.
  13. Brian Gill & J.R. Lockwood III & Francisco Martorell & Claude Messan Setodji & Kevin Booker, 2009. "An Exploratory Analysis of Adequate Yearly Progress, Identification for Improvement, and Student Achievement in Two States and Three Cities," Mathematica Policy Research Reports, Mathematica Policy Research 6360, Mathematica Policy Research.

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