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Do Private Schools Provide Competition for Public Schools?

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  • Caroline Minter Hoxby

Abstract

Arguments in favor of school choice depend on the idea that competition between schools improves the quality of education. However, we have almost no empirical evidence on whether competition actually affects school quality. In this study, I examine the effects of inter-school competition on public schools by using exogenous variation in the availability and costs of private school alternatives to public schools. Because low public school quality raises the demand for private schools as substitutes for public schools, we cannot simply compare public school students' outcomes in areas with and without substantial private school enrollment. Such simple comparisons confound the effect of greater private school competitiveness with the increased demand for private schools where the public schools are poor in quality. I derive instruments for private school competition from the fact that it is less expensive and difficult to set up religious schools, which accounts for 9 out of 10 private school students in the U.S., in areas densely populated by members of the affiliated religion. I find that greater private school competitiveness significantly raises the quality of public schools, as measured by the educational attainment, wages, and high school graduation rates of public school students. In addition, I find some evidence that public schools react to greater competitiveness of private schools by paying higher teacher salaries.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4978.

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Date of creation: Dec 1994
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Handle: RePEc:nbr:nberwo:4978

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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Brueckner, Jan K., 1979. "Property values, local public expenditure and economic efficiency," Journal of Public Economics, Elsevier, vol. 11(2), pages 223-245, March.
  2. Summers, Anita A & Wolfe, Barbara L, 1977. "Do Schools Make a Difference?," American Economic Review, American Economic Association, vol. 67(4), pages 639-52, September.
  3. Hausman, Jerry A., 1983. "Specification and estimation of simultaneous equation models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 7, pages 391-448 Elsevier.
  4. Charles R. Nelson & Richard Startz, 1988. "Some Further Results on the Exact Small Sample Properties of the Instrumental Variable Estimator," NBER Technical Working Papers 0068, National Bureau of Economic Research, Inc.
  5. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  6. 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.
  7. Courant, Paul N., 1977. "A general equilibrium model of heterogeneous local property taxes," Journal of Public Economics, Elsevier, vol. 8(3), pages 313-327, December.
  8. Barlow, Robin, 1970. "Efficiency Aspects of Local School Finance," Journal of Political Economy, University of Chicago Press, vol. 78(5), pages 1028-40, Sept.-Oct.
  9. Eric A. Hanushek, 1979. "Conceptual and Empirical Issues in the Estimation of Educational Production Functions," Journal of Human Resources, University of Wisconsin Press, vol. 14(3), pages 351-388.
  10. Couch, Jim F & Shughart, William F, II & Williams, Al L, 1993. " Private School Enrollment and Public School Performance," Public Choice, Springer, vol. 76(4), pages 301-12, August.
  11. 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.
  12. Evans, William N & Schwab, Robert M, 1995. "Finishing High School and Starting College: Do Catholic Schools Make a Difference?," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 941-74, November.
  13. Richard J. Murnane, 1984. "A Review Essay-Comparisons of Public and Private Schools: Lessons from the Uproar," Journal of Human Resources, University of Wisconsin Press, vol. 19(2), pages 263-277.
  14. Akin, John S & YoungDay, Douglas J, 1976. "The Efficiency of Local School Finance," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 255-58, May.
  15. Borland, Melvin V. & Howsen, Roy M, 1992. "Student academic achievement and the degree of market concentration in education," Economics of Education Review, Elsevier, vol. 11(1), pages 31-39, March.
  16. John Bound & David A. Jaeger & Regina Baker, 1993. "The Cure Can Be Worse than the Disease: A Cautionary Tale Regarding Instrumental Variables," NBER Technical Working Papers 0137, National Bureau of Economic Research, Inc.
  17. Samuel Bowles, 1970. "Towards an Educational Production Function," NBER Chapters, in: Education, Income, and Human Capital, pages 9-70 National Bureau of Economic Research, Inc.
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