Competition Effects of Charter Schools: New Evidence from North Carolina

Economic theory predicts that, by aligning household preference with the education production, more choice and competition would lead to an improvement in school quality and student outcomes. However, empirical studies of the competition effects have obtained mixed results, ranging from negative or insignificant effects, to significant positive effects. In this paper we use travel time to measure charter school penetration, which is expected to more accurately reflect the ease of access to charter schools. We further combine the instrumental variables approach with student and school fixed effects to account for the non-randomness in charter location and student mobility. Our school-level analysis of North Carolina data indicates that charter penetration leads to an improvement in teacher qualifications in nearby traditional public schools. Our student-level analysis suggests that charter competition leads to systematic positive gains in math score gains, but not in reading. The improvements are mostly concentrated in middle schools and among white students.