Competition, Incentives, and the Distribution of Investments in Private School Markets
This paper develops a one-to-one matching model to analyze how different education funding regimes affect incentives and equilibrium allocations in competitive markets served by heterogeneous private providers. The main result is that alternative funding schemes change the relative incentives faced by schools with different productivities, dramatically altering equilibrium allocations and outcomes. The paper also explicitly characterizes equilibrium in markets served by for-profit and non-profit schools, an analysis that has not been made in previous literature. The basic version of the model is calibrated using data from Chile´s education market and used to simulate the impact of alternative policy scenarios.
|Date of creation:||2010|
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