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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
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    References listed on IDEAS

    as
    1. Epple, Dennis & Newlon, Elizabeth & Romano, Richard, 2002. "Ability tracking, school competition, and the distribution of educational benefits," Journal of Public Economics, Elsevier, vol. 83(1), pages 1-48, January.
    2. 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.
    3. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation of Elementary Education," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 577-599.
    4. Eden, B., 1992. "How to Subsidize Education and Achieve Voluntary Integration: An Analysis of Voucher Systems," Working Papers 92-22, University of Iowa, Department of Economics.
    5. Edwin G. West & Zhiqi Chen, 2000. "Selective versus Universal Vouchers: Modelling Median Voter Preferences in Education," American Economic Review, American Economic Association, vol. 90(5), pages 1520-1534, December.
    6. Roland Bénabou, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 237-264.
    7. Elizabeth M. Caucutt, 2002. "Educational Vouchers When There Are Peer Group Effects--Size Matters," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 195-222, February.
    8. Evans, William N & Oates, Wallace E & Schwab, Robert M, 1992. "Measuring Peer Group Effects: A Study of Teenage Behavior," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 966-991, October.
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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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