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In 'Trusts' We Trust: Socially Motivated Private Schools in Nepal

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  • Pal, Sarmistha

    ()
    (University of Surrey)

  • Saha, Bibhas

    ()
    (University of East Anglia)

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    Abstract

    We study school choice and school efficiency in terms of secondary school completion test scores by utilizing a unique database from Nepal. There are two novel features of our analysis: firstly we allow for heterogeneity among private schools, by distinguishing socially motivated trust-run schools from profit-motivated company-run schools, and secondly, we include school's expenditure as a determinant of its efficiency per unit of cost. We find that when expenditure is not included, the trust-run school comes on top, slightly but distinctly, ahead of the profit-motivated school. But if expenditure is included, the trust-run school's position becomes sensitive to the level of expenditure, as it is the only school to exhibit sensitivity between expenditure and test score. In the urban area, the public school is always at the bottom, and between the two types of the private school the trust-run school ranks first (second) at high (low) levels of expenditure. However, in the rural area it is a three way race, with the trust school coming on top again at high expenditure, but falling to bottom at low levels of expenditure. This picture is fairly robust to considerations of subject fixed effects and to inclusion or exclusion of private aided schools or private tuition. We show both theoretically and empirically that socially motivated schools can be efficient and outperform profit-motivated schools.

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    Bibliographic Info

    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 8270.

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    Length: 58 pages
    Date of creation: Jun 2014
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    Handle: RePEc:iza:izadps:dp8270

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    Related research

    Keywords: private school heterogeneity; school expenditure per student; efficiency; private school premium; social objectives; private motive; rural-urban dichotomy; Nepal;

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    References

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    1. David Newhouse & Kathleen Beegle, 2006. "The Effect of School Type on Academic Achievement: Evidence from Indonesia," Journal of Human Resources, University of Wisconsin Press, vol. 41(3).
    2. Chudgar, Amita & Quin, Elizabeth, 2012. "Relationship between private schooling and achievement: Results from rural and urban India," Economics of Education Review, Elsevier, Elsevier, vol. 31(4), pages 376-390.
    3. Rajeev Dehejia & Thomas DeLeire & Erzo F.P. Luttmer & Joshua Mitchell, 2007. "The Role of Religious and Social Organizations in the Lives of Disadvantaged Youth," NBER Working Papers 13369, National Bureau of Economic Research, Inc.
    4. Besley, Timothy & Ghatak, Maitreesh, 2007. "Retailing public goods: The economics of corporate social responsibility," Journal of Public Economics, Elsevier, Elsevier, vol. 91(9), pages 1645-1663, September.
    5. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, American Economic Association, vol. 88(1), pages 33-62, March.
    6. Helena Holmlund & Sandra McNally & Martina Viarengo, 2009. "Does Money Matter for Schools?," CEE Discussion Papers, Centre for the Economics of Education, LSE 0105, Centre for the Economics of Education, LSE.
    7. Kingdon, Geeta, 1996. "The Quality and Efficiency of Private and Public Education: A Case-Study of Urban India," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 57-82, February.
    8. Fiona Steele & Anna Vignoles & Andrew Jenkins, 2007. "The effect of school resources on pupil attainment: a multilevel simultaneous equation modelling approach," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 26481, London School of Economics and Political Science, LSE Library.
    9. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, Econometric Society, vol. 51(2), pages 507-12, March.
    10. Karthik Muralidharan & Venkatesh Sundararaman, 2013. "The Aggregate Effect of School Choice: Evidence from a Two-stage Experiment in India," NBER Working Papers 19441, National Bureau of Economic Research, Inc.
    11. Eric A. Hanushek, 2003. "The Failure of Input-Based Schooling Policies," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 113(485), pages F64-F98, February.
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