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Impact of Voucher Design on Public School Performance: Evidence from Florida and Milwaukee Voucher Programs

  • Rajashri Chakrabarti

This paper examines the impact of vouchers in general, and voucher design in particular, on public school performance. It argues that all voucher programs are not created equal. There are often fundamental differences in voucher designs that affect public school incentives differently and induce different responses from them. It analyzes two publicly funded voucher programs in the U.S. The 1990 Milwaukee experiment can be looked upon as a "voucher shock" program with a sudden Government announcement that the low-income public school population will be eligible for vouchers. The 1999 Florida program, on the other hand, can be looked upon as a "threat of voucher" program where the failing public schools are first threatened with vouchers, and vouchers are implemented only if they fail to meet a government designated cutoff quality level. In particular, a school getting an "F" grade for the first time is exposed to the threat of vouchers but does not face vouchers unless and until it gets a second "F" within the next three years. To analyze and compare the impacts of these two alternative designs on public school incentives and performance, I construct a theoretical model that captures the basic features of the two programs. It is an equilibrium theory of public school and household behavior where public school maximizes net revenue and households care about public school peer group quality in addition to public school effort. I use the model to analyze three alternative scenarios--a simple public-private system without vouchers, a Milwaukee-type voucher shock system and a Florida-type threat of voucher system. Providing micro-foundations to the public school payoff function, the model endogenously determines public school effort and peer group quality at each of the program equilibria. It yields three predictions. First, the effects of a Milwaukee-type program on public school effort and quality are ambiguous (where public school quality is a composite of public school effort and peer group quality.) Second, a Florida-type program will lead to an unambiguous improvement in public school effort and quality and third, these improvements will exceed the corresponding improvements (if any) in a Milwaukee-type program. Using school-scores data and a difference-in-differences estimation strategy in trends, the second part of the paper shows that these predictions are validated empirically. There is significant evidence of large improvement of the treated schools in Florida, but no consistent evidence of improvement of the Milwaukee treated schools. The findings are reasonably robust in that they survive several robustness checks including correcting for mean reversion. The design of the Florida program also enables a regression discontinuity analysis to investigate the impact of the Florida program. Interestingly, the results from this analysis strongly mirror those obtained from the above analysis. Thus both theoretically and empirically, the paper presents strong evidence that voucher design matters and in particular, the public school response under a Florida-type program is much larger than that in a Milwaukee-type program. The findings have important implications for public school reform, which are all the more relevant in the context of the present concern over public school performance.

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Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 221.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:221
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  1. Brian A. Jacob & Lars Lefgren, 2004. "Remedial Education and Student Achievement: A Regression-Discontinuity Analysis," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 226-244, February.
  2. Rajashri Chakrabarti, 2005. "Can Increasing Private School Participation and Monetary Loss in a Voucher Program Affect Public School Performance? Evidence from Milwaukee," Public Economics 0512003, EconWPA.
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  8. Nechyba, Thomas J., 2002. "Introducing School Choice into Multi-District Public School Systems," Working Papers 02-13, Duke University, Department of Economics.
  9. Chakrabarti, Rajashri, 2013. "Do vouchers lead to sorting under random private school selection? Evidence from the Milwaukee voucher program," Economics of Education Review, Elsevier, vol. 34(C), pages 191-218.
  10. Caroline M. Hoxby, 2002. "School Choice and School Productivity (or Could School Choice be a Tide that Lifts All Boats?)," NBER Working Papers 8873, National Bureau of Economic Research, Inc.
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  13. Wilbert van der Klaauw, 2002. "Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression-Discontinuity Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1249-1287, November.
  14. David N. Figlio & Maurice E. Lucas, 2004. "What's in a Grade? School Report Cards and the Housing Market," American Economic Review, American Economic Association, vol. 94(3), pages 591-604, June.
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  16. 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.
  17. David N. Figlio & Cecilia Rouse, 2005. "Do Accountability and Voucher Threats Improve Low-Performing Schools?," NBER Working Papers 11597, National Bureau of Economic Research, Inc.
  18. Eric A. Hanushek & Margaret E. Raymond, 2002. "Improving educational quality: how best to evaluate our schools," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 47(Jun), pages 193-247.
  19. Joshua D. Angrist & Victor Lavy, 1999. "Using Maimonides' Rule To Estimate The Effect Of Class Size On Scholastic Achievement," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 533-575, May.
  20. Chang-Tai Hsieh & Miguel Urquiola, 2003. "When Schools Compete, How Do They Compete? An Assessment of Chile's Nationwide School Voucher Program," NBER Working Papers 10008, National Bureau of Economic Research, Inc.
  21. Kenneth Y. Chay & Patrick J. McEwan & Miguel Urquiola, 2005. "The Central Role of Noise in Evaluating Interventions That Use Test Scores to Rank Schools," American Economic Review, American Economic Association, vol. 95(4), pages 1237-1258, September.
  22. Thomas J. Nechyba, 1996. "Public School Finance in a General Equilibrium Tiebout World: Equalization Programs, Peer Effects and Private School Vouchers," NBER Working Papers 5642, National Bureau of Economic Research, Inc.
  23. 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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