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Could Do Better: The Effectiveness of Incentives and Competition in Schools

  • Gianni De Fraja
  • Pedro Landeras

This paper studies the effects of incentive mechanisms and of the competitive environment on the interaction between schools and students, in a set-up where their effort affects the students' educational attainment. We show that increasing the power of the incentive scheme and the effectiveness of competition may have the counterintuitive effect of lowering the students' attainment. In a simple dynamic set-up, where the reputation of the schools affects recruitment, and we show that increased competition leads to segregation of pupils by ability.

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Paper provided by Department of Economics, University of York in its series Discussion Papers with number 02/11.

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Handle: RePEc:yor:yorken:02/11
Contact details of provider: Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
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Fax: (0)1904 323759
Web page: http://www.york.ac.uk/economics/
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  19. Dee, Thomas S., 1998. "Competition and the quality of public schools," Economics of Education Review, Elsevier, vol. 17(4), pages 419-427, October.
  20. Holger Sieg & Dennis Epple & Richard Romano, 2003. "Peer effects, financial aid and selection of students into colleges and universities: an empirical analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 501-525.
  21. Caroline Minter Hoxby, 1994. "Does Competition Among Public Schools Benefit Students and Taxpayers?," NBER Working Papers 4979, National Bureau of Economic Research, Inc.
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  25. Henderson, Vernon & Mieszkowski, Peter & Sauvageau, Yvon, 1978. "Peer group effects and educational production functions," Journal of Public Economics, Elsevier, vol. 10(1), pages 97-106, August.
  26. Rothschild, Michael & White, Lawrence J, 1995. "The Analytics of the Pricing of Higher Education and Other Services in Which the Customers Are Inputs," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 573-86, June.
  27. Victor Lavy, 2002. "Evaluating the Effect of Teachers' Group Performance Incentives on Pupil Achievement," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1286-1317, December.
  28. Eric A. Hanushek & Steven G. Rivkin, 2003. "Does Public School Competition Affect Teacher Quality?," NBER Chapters, in: The Economics of School Choice, pages 23-48 National Bureau of Economic Research, Inc.
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  30. Borland, Melvin V. & Howsen, Roy M, 1992. "Student academic achievement and the degree of market concentration in education," Economics of Education Review, Elsevier, vol. 11(1), pages 31-39, March.
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  32. Steve Gibbons & Stephen Machin, 2001. "Valuing Primary Schools," CEE Discussion Papers 0015, Centre for the Economics of Education, LSE.
  33. Gordon C. Winston, 1999. "Subsidies, Hierarchy and Peers: The Awkward Economics of Higher Education," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 13-36, Winter.
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