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Educational Vouchers and Cream Skimming

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  • Dennis Epple
  • Richard Romano

Abstract

Epple and Romano (1998) show equilibrium provision of education by public and private schools has the latter skim off the wealthiest and most-able students, and flat-rate vouchers lead to further cream skimming. Here we study voucher design that would inject private-school competition and increase technical efficiencies without cream skimming. Conditioning vouchers on student ability without restriction on participating schools' policies fails to effect significantly cream skimming. However, by adding conditions like tuition constraints such as vouchers can reap the benefits of school competition without increased stratification. This can be accomplished while allowing voluntary participation in the voucher system and without tax increases.

Suggested Citation

  • Dennis Epple & Richard Romano, 2002. "Educational Vouchers and Cream Skimming," NBER Working Papers 9354, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9354
    Note: CH PE ED
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    References listed on IDEAS

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    1. Weili Ding & Steven F. Lehrer, 2007. "Do Peers Affect Student Achievement in China's Secondary Schools?," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 300-312, May.
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    More about this item

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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