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On The Political Economy Of Educational Vouchers

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  • Dennis N. Epple
  • Richard Romano

Abstract

Two significant challenges hamper analyses of the collective choice of educational vouchers. One is the multi-dimensional choice set arising from the interdependence of the voucher, public education spending, and taxation. Second, even absent a voucher, preferences over public spending are not single-peaked; a middling level of public school spending may be less attractive to a household than either high public school spending or private education coupled with low public spending. We show that Besley and Coate’s (1997) representative democracy model provides a viable approach to overcome these hurdles. We provide a complete characterization of equilibria with an endogenous voucher. A voucher is adopted in political equilibrium provided the coefficient of variation of income is sufficiently small. We undertake a parallel quantitative analysis. We find that no voucher arises in equilibrium for the U.S. income distribution, which exhibits too much heterogeneity. For tighter income distributions, including those in Douglas County, Colorado (where a voucher was recently adopted) and in Denmark (which has a national voucher program) our model predicts a positive voucher. Public support for a not-too-large voucher arises because the cross subsidy to public school expenditure from those switching to private schools outweighs the subsidy to those who attend private school in the absence of a voucher.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17986.

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Date of creation: Apr 2012
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Handle: RePEc:nbr:nberwo:17986

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  1. Tim Besley & Stephen Coate, . ""An Economic Model of Representative Democracy''," CARESS Working Papres 95-02, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, September.
  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 300, Federal Reserve Bank of New York.
  4. Eric J. Brunner & Jennifer Imazeki & Stephen L. Ross, 2010. "Universal Vouchers and Racial and Ethnic Segregation," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 912-927, November.
  5. Jackson, Matthew O. & Mathevet, Laurent & Mattes, Kyle, 2007. "Nomination Processes and Policy Outcomes," International Quarterly Journal of Political Science, now publishers, vol. 2(1), pages 67-92, March.
  6. McMillan, Robert, 2005. "Erratum to "Competition, incentives, and public school productivity"," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1133-1154, June.
  7. Dennis Epple & Richard Romano, 2012. "Economic Modeling and Analysis of Educational Vouchers," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 159-183, 07.
  8. Rangazas, Peter, 1995. " Vouchers and Voting: An Initial Estimate Based on the Median Voter Model," Public Choice, Springer, vol. 82(3-4), pages 261-79, March.
  9. Ireland, Norman J., 1990. "The mix of social and private provision of goods and services," Journal of Public Economics, Elsevier, vol. 43(2), pages 201-219, November.
  10. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  11. Joseph G. Altonji & Ching-I Huang & Christopher R. Taber, 2010. "Estimating the Cream Skimming Effect of School Choice," NBER Working Papers 16579, National Bureau of Economic Research, Inc.
  12. Caroline M. Hoxby, 2000. "Does Competition among Public Schools Benefit Students and Taxpayers?," American Economic Review, American Economic Association, vol. 90(5), pages 1209-1238, December.
  13. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August.
  14. Peter Bearse, Buly A. Cardak, Gerhard Glomm, B. Ravikumar, 2009. "Why do Education Vouchers Fail?," Caepr Working Papers 2009-014, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  15. Hoyt, William H. & Lee, Kangoh, 1998. "Educational vouchers, welfare effects, and voting," Journal of Public Economics, Elsevier, vol. 69(2), pages 211-228, June.
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