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Choice and Competition in Local Education Markets

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  • Patrick Bayer
  • Robert McMillan

Abstract

Prompted by widespread concerns about public school quality, a growing empirical literature has measured the effects of greater choice on school performance. This paper contributes to that literature in three ways. First, it makes the observation that the overall effect of greater choice, which has been the focus of prior research, can be decomposed into demand and supply components: knowing the relative sizes of the two is very relevant for policy. Second, using rich data from a large metropolitan area, it provides a direct and intuitive measure of the competition each school faces. This takes the form of a school-specific elasticity that measures the extent to which reductions in school quality would lead to reductions in demand. Third, the paper provides evidence that these elasticity measures are strongly related to school performance: a one-standard deviation increase in the competitiveness of a school's local environment within the Bay Area leads to a 0.15 standard deviation increase in average test scores. This positive correlation is robust and is consistent with strong supply responsiveness on the part of public schools, of relevance to the broader school choice debate.

Suggested Citation

  • Patrick Bayer & Robert McMillan, 2005. "Choice and Competition in Local Education Markets," NBER Working Papers 11802, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11802
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    Cited by:

    1. Gaynor, Martin & Laudicella, Mauro & Propper, Carol, 2012. "Can governments do it better? Merger mania and hospital outcomes in the English NHS," Journal of Health Economics, Elsevier, vol. 31(3), pages 528-543.
    2. Francisco Gallego & Andrés Hernando, 2009. "School Choice in Chile: Looking at the Demand Side," Documentos de Trabajo 356, Instituto de Economia. Pontificia Universidad Católica de Chile..
    3. Stephen Gibbons & Stephen Machin & Olmo Silva, 2008. "Choice, Competition, and Pupil Achievement," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 912-947, June.
    4. Martin Gaynor & Rodrigo Moreno-Serra & Carol Propper, 2013. "Death by Market Power: Reform, Competition, and Patient Outcomes in the National Health Service," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 134-166, November.
    5. Andrew E. Clark & Carine Milcent, 2015. "Hospital Employment and Local Unemployment: Evidence from French Health Reforms," PSE Working Papers halshs-01183454, HAL.
    6. Machin, Stephen, 2011. "Houses and schools: valuation of school quality through the housing market: EALE 2010 presidential address," LSE Research Online Documents on Economics 47495, London School of Economics and Political Science, LSE Library.
    7. Rita Santos & Hugh Gravelle & Carol Propper, 2013. "Does quality affect patients’ choice of doctor? Evidence from the UK," The Centre for Market and Public Organisation 13/306, Department of Economics, University of Bristol, UK.
    8. Felipe Barrera-Osorio & Dario Maldonado & Catherine Rodríguez, 2012. "Calidad de la educación básica y media en Colombia: diagnóstico y propuestas," DOCUMENTOS DE TRABAJO 010078, UNIVERSIDAD DEL ROSARIO.
    9. Rudiger Ahrend & Emily Farchy & Ioannis Kaplanis & Alexander C. Lembcke, 2015. "What Makes Cities More Productive? Agglomeration Economies and the Role of Urban Governance: Evidence from 5 OECD Countries," SERC Discussion Papers 0178, Spatial Economics Research Centre, LSE.
    10. Simon Burgess & Helen Slater, 2006. "Using Boundary Changes to Estimate the Impact of School Competition on Test Scores," The Centre for Market and Public Organisation 06/158, Department of Economics, University of Bristol, UK.
    11. Gibbons, Stephen & Machin, Stephen & Silva, Olmo, 2013. "Valuing school quality using boundary discontinuity," LSE Research Online Documents on Economics 45246, London School of Economics and Political Science, LSE Library.
    12. Gallego Francisco, 2013. "When Does Inter-School Competition Matter? Evidence from the Chilean “Voucher” System," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(2), pages 525-562, August.
    13. Chakrabarti, Rajashri & Roy, Joydeep, 2015. "Housing markets and residential segregation: Impacts of the Michigan school finance reform on inter- and intra-district sorting," Journal of Public Economics, Elsevier, vol. 122(C), pages 110-132.
    14. Gibbons, Stephen & Machin, Stephen & Silva, Olmo, 2013. "Valuing school quality using boundary discontinuities," Journal of Urban Economics, Elsevier, vol. 75(C), pages 15-28.
    15. Chumacero, Romulo & Gómez Caorsi, Daniel & Paredes, Ricardo, 2008. "I would walk 500 miles (if it paid)," MPRA Paper 15125, University Library of Munich, Germany, revised Dec 2008.
    16. Burgess, Simon & Briggs, Adam, 2010. "School assignment, school choice and social mobility," Economics of Education Review, Elsevier, vol. 29(4), pages 639-649, August.
    17. Ricardo Paredes & Rómulo Chumacero & Juan Gallegos, 2012. "Competition Pressures and Academic Performance in a Generalized Vouchers Context," EcoMod2012 4184, EcoMod.
    18. Andrew E. Clark & Carine Milcent, 2015. "Hospital Employment and Local Unemployment: Evidence from French Health Reforms," Working Papers halshs-01183454, HAL.
    19. Ahrend, Rudiger & Farchy, Emily & Kaplanis, Ioannis & Lembcke, Alexander C., 2016. "What Makes Cities More Productive? Evidence from 5 OECD Countries on the Role of Urban Governance," Beiträge zur Jahrestagung 2016 (Witten/Herdecke) 175187, Verein für Socialpolitik, Ausschuss für Wirtschaftssysteme und Institutionenökonomik.
    20. Clark, Andrew E. & Milcent, Carine, 2018. "Ownership and hospital behaviour: Employment and local unemployment," Social Science & Medicine, Elsevier, vol. 202(C), pages 151-161.
    21. Machin, Stephen, 2011. "Houses and schools: Valuation of school quality through the housing market," Labour Economics, Elsevier, vol. 18(6), pages 723-729.
    22. Rita Santos & Hugh Gravelle & Carol Propper, 2013. "Does quality affect patients’ choice of doctor? Evidence from the UK," Working Papers 088cherp, Centre for Health Economics, University of York.
    23. Stephen Gibbons & Stephen Machin, 2008. "Valuing school quality, better transport, and lower crime: evidence from house prices," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 99-119, spring.
    24. Victor Lavy, 2006. "From Forced Busing to Free Choice in Public Schools: Quasi-Experimental Evidence of Individual and General Effects," NBER Working Papers 11969, National Bureau of Economic Research, Inc.
    25. Rómulo A. Chumacero & Juan Gallegos Mardones & Ricardo D. Paredes, 2016. "Competition Pressures and Academic Performance in Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 43(2 Year 20), pages 217-232, December.

    More about this item

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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