Estimating the Effects of Private School Vouchers in Multidistrict Economies

Abstract

This paper estimates a general equilibrium model of school quality and household residential and school choice for economies with multiple public school districts and private (religious and nonsectarian) schools. The estimates, obtained through full-solution methods, are used to simulate two large-scale private school voucher programs in the Chicago metropolitan area: universal vouchers and vouchers restricted to nonsectarian schools. In the simulations, both programs increase private school enrollment and affect household residential choice. Under nonsectarian vouchers, however, private school enrollment expands less than under universal vouchers, and religious school enrollment declines for large nonsectarian vouchers. Fewer households benefit from nonsectarian vouchers. (JEL H75, I21, I22)

Information asymmetry and equilibrium monitoring in education

“…Ability-based sorting is largely driven by the role of peer quality in achievement. These types of utility and production functions are common in the literature (see Epple and Romano, 1998;Nechyba, 1999;Ferreyra, 2007). Income-and ability-based sorting across schools is strengthened by the role of monitoring, as described above.…”

“…We model private schools as competitive firms that can select their students and charge them a uniform tuition (e.g., Ferreyra, 2007;McMillan, 2005;Nechyba, 1999). Since there are no fixed costs to providing school effort, and households have incentives to join a school with households of equal or higher ability and income according to Eq.…”

“…Peer quality does not affect school effort, but parental monitoring does. As in Nechyba (1999) and Ferreyra (2007), peer quality enables us to match private school attendance in our computational exercise. 13 If there is more than one household per type, a given private school may contain multiple households (of the same type).…”

“…Equilibrium models in education have been used to analyze policies such as private school vouchers and public school finance reform (e.g. Epple and Romano, 1998;Ferreyra, 2007;Nechyba, 1999), although not to study school effort or household learning and monitoring efforts. While some researchers have modeled the role of student learning effort in achievement (Blankenau and Camera, 2009;De Fraja and Landeras, 2006;MacLeod and Urquiola, 2009;Albornoz et al, 2010), and others have empirically studied parental involvement (McMillan, 2000;Walsh, 2010), to our knowledge we are the first to model household monitoring.…”

Entry and Quality Choices in Child Care Markets

“…This paper contributes to a growing literature on the implications of choice and independent supply in education markets, including Manski (1992), Epple and Romano (1998), Nechyba (2003), Epple, Figlio and Romano (2004), Besley and Ghatak (2005), Urquiola (2005), Hsieh and Urquiola (2006), Rothstein (2006), Ferreyra (2007) and Epple and Romano (2008). While this literature has greatly improved our understanding on whether and how households sort between heterogeneous providers, comparatively little attention has been paid to how educational suppliers choose their location and quality.…”