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Competition, wages and teacher sorting: four lessons learned from a voucher reform

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  • Hensvik, Lena

    () (IFAU - Institute for Labour Market Policy Evaluation)

Abstract

This paper studies how local school competition affects teacher wages at markets where wages are set via individual wage bargaining. Using regional variation in private school entry generated by a Swedish reform which allowed private schools to enter freely and a comprehensive matched employer employee data covering all high school teachers in Sweden over 16 years, I analyze the effects of competition on wages as well as labor flows. The results suggest that competition translates into higher wages, also for teachers in public schools. While the average increases are modest new teachers gain 2 percent and high ability teachers in math and science receive 4 percent higher wages in the most competitive areas compared to areas without any competition from private schools. Several robustness checks support a causal interpretation of the results which together highlight the potential gains from school competition through a more differentiated wage setting of teachers.

Suggested Citation

  • Hensvik, Lena, 2010. "Competition, wages and teacher sorting: four lessons learned from a voucher reform," Working Paper Series 2010:8, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  • Handle: RePEc:hhs:ifauwp:2010_008
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    File URL: http://www.ifau.se/upload/pdf/se/2010/wp10-08-Competition-wages-and-teacher-sorting-four-lessons-learned-from-a-voucher-reform.pdf
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    References listed on IDEAS

    as
    1. Orley C. Ashenfelter & Henry Farber & Michael R. Ransom, 2010. "Modern Models of Monopsony in Labor Markets: A Brief Survey," Working Papers 1223, Princeton University, Department of Economics, Industrial Relations Section..
    2. Patrick Bayer & Stephen L. Ross & Giorgio Topa, 2008. "Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1150-1196, December.
    3. Marianne Bertrand & Francis Kramarz, 2002. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1369-1413.
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    Cited by:

    1. Krzysztof Karbownik, 2016. "The Effects of Student Composition on Teacher Turnover: Evidence from an Admission Reform," CESifo Working Paper Series 6133, CESifo Group Munich.
    2. Binelli, Chiara & Rubio-Codina, Marta, 2013. "The Returns to Private Education: Evidence from Mexico," Economics of Education Review, Elsevier, vol. 36(C), pages 198-215.

    More about this item

    Keywords

    Private school competition; teacher wages; monopsony power;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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