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Priced Out: Aggregate Income Shocks And School Pricing In The Chilean Voucher Market

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  • Benjamin Feigenberg

Abstract

This paper studies private school market behavior. If school quality is a normal good and schools have market power, profit‐maximizing schools may lower enrollment when incomes rise given parents' preferences for small class sizes and high‐socioeconomic status (SES) classmates. To demonstrate the possibility of such a response, I present simulations based on a stylized model of school pricing. Using data on local income variation in Chile, I show that positive income shocks cause private school prices to rise and enrollments to fall. Enrollment declines are concentrated among low‐SES students, who do not experience the same test score gains as their higher‐SES peers. (JEL I24, L1, O15)

Suggested Citation

  • Benjamin Feigenberg, 2021. "Priced Out: Aggregate Income Shocks And School Pricing In The Chilean Voucher Market," Economic Inquiry, Western Economic Association International, vol. 59(2), pages 696-721, April.
    • Handle: RePEc:bla:ecinqu:v:59:y:2021:i:2:p:696-721
    DOI: 10.1111/ecin.12945
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    References listed on IDEAS

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    1. Francisco Gallego & Jeanne Lafortune, 2023. "Baby commodity booms? The impact of commodity shocks on fertility decisions and outcomes," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(1), pages 295-320, January.

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    More about this item

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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