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Education Vouchers, the Peer Group Problem, and the Question of Dropouts


  • J. Stephen Ferris

    () (Department of Economics, Carleton University)

  • Edwin G. West


This paper extends the analysis of, who argue that vouchers encourage private schools to “skim the cream off” public schools. Because the education received by students depends on the quality of their classmates, this loss reduces the quality of education received by those remaining in the public system—the peer group effect. In our model, vouchers allow low-income students to escape the frustration of having to conform to the uniformity of the public school system. Ultimately, the size of the dropout effect relative to the peer group effect is an empirical question. Nevertheless, to the extent that voucher use reduces the student dropout rate, the peer group externality becomes insufficient in itself to prevent reconsideration of a voucher system on equity as well as efficiency grounds.

Suggested Citation

  • J. Stephen Ferris & Edwin G. West, 2002. "Education Vouchers, the Peer Group Problem, and the Question of Dropouts," Southern Economic Journal, Southern Economic Association, vol. 68(4), pages 774-793, April.
  • Handle: RePEc:sej:ancoec:v:68:4:y:2002:p:774-793

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    References listed on IDEAS

    1. Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 149-163, April.
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    7. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
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    10. Caporale, Tony & McKiernan, Barbara, 1996. "The Relationship between Output Variability and Growth: Evidence from Post War UK Data," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(2), pages 229-236, May.
    11. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
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    Cited by:

    1. Billger, Sherrilyn M., 2007. "Principal Accountability at Private Secondary Schools," IZA Discussion Papers 3162, Institute for the Study of Labor (IZA).

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