Can Increasing Private School Participation and Monetary Loss in a Voucher Program Affect Public School Performance? Evidence from Milwaukee

Abstract

The Milwaukee voucher program, as implemented in 1990, allowed only non-sectarian private schools to participate in the program. Following a Wisconsin Supreme Court ruling, the program saw a major shift and entered into its second phase, when religious private schools were allowed to participate for the first time in 1998. This led to more than a three-fold increase in the number of private schools and almost a four-fold increase in the number of choice students. Moreover, due to some changes in funding provisions, the revenue loss per student from vouchers increased in the second phase of the program. This paper analyzes, both theoretically and empirically, the impacts of these changes on public school performance in Milwaukee. It argues that voucher design matters and that the choice of parameters in a voucher program is crucial as far as impacts on public school incentives and performance are concerned. In the context of a theoretical model of public school and household behavior, the paper establishes that the policy changes will lead to an improvement of the public schools in the second phase of the program as compared to the first phase.Using data from 1987 to 2002 and a difference-in-differences estimation strategy in trends, the paper then shows that the theoretical prediction is validated empirically. This result is robust to alternative samples and specifications, and survive robustness checks including correcting for mean reversion.Keywords: Vouchers, Public School Performance, Competition, Mean Reversion JEL Classifications: H4, I21, I28 * I am grateful to Steve Coate, Ron Ehrenberg and Miguel Urquiola for helpful comments, suggestions and encouragement.

Education and selective vouchers

“…6 Part of the recent positive literature on education (including my contribution) builds on the notable paper by Epple and Romano 4 Concerning the applied and empirical literature on education and on the introduction of vouchers, see, for instance, Card and Krueger (1992), Filer and Munich (2001), McEwan and Carnoy (2002) or Chakrabarti (2008).…”

Markets in Education

“…However, these effects are very modest is size, they were found in later rather than earlier phases of the programme, and they apply more to reading than to mathematics (e.g. see Chakrabarti, 2008;Wolf, 2009).…”

“…During the first phase of the Milwaukee Parental Choice Programme, the voucher programme was funded by cuts in the budget for public schools. After a change in policy and extension of the programme, additional costs were funded by the state (Chakrabarti, 2008).…”

“…There are various indications that choice regimes have long-term effects and, moreover, that they may differ from short-term effects. To start with, studies tracing the impact of policies in the long-run show that effects change with time (Bagley, 2006;Buckley and Schneider, 2006;Chakrabarti, 2008;Credo, 2009;Wolf, 2009). It seems to take time for parents to understand and act upon new choice regimes, with some groups of parents acting more quickly than others.…”

“…The Herfindahl and Herfindahl-Hirschman Indices are also based on estimates of market share in a particular geographical area (Hoxby 2000;Greene and Kang, 2004;Dijkgraaf et al, 2008). Some measures take attendance patterns into account, either to count the proportion of students who live in a (former) attendance area without attending the home school (Chakrabarti, 2008) or to use attendance patterns to empirically derive local markets (Bifulco and Ladd, 2006). Many studies include more measures to check their results for robustness.…”