Economics 147

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Economics 147

• Winter 2005
• Lecture 13

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Outline for today

• Effects of distribution of spending on
  distribution of outcomes
• Other effects of SFEs
• Vouchers

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How does distribution of spending affect
distribution of outcomes?

• Equalizing spending helps equalize outcomes
• Card and Payne, national study, 1997
• Court-ordered SFEs induce more dramatic financial
  changes than other SFEs
• SFE-induced reductions in spending inequality
  reduced inequality in SAT scores
• Equalizing spending does not affect outcomes
• Clark, study of SFE in Kentucky, 2003

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Other effects of SFE

• Potential effects on residential sorting
• Voluntary contributions
• Private schooling
• Effects on level and distribution of
  non-education revenue and spending.

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Pros and cons of vouchers

• Pros
• Improve matching of heterogeneous tastes to
  schools
• Impose competitive forces on market for education
• Cons
• excessive school specialization
• Inefficient use of public funds
• Stratification
• What if schools are not like other markets?
• Special education concerns

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Excessive school specialization What would
parents choose?

• Curriculum?
• Grade inflation?
• Structure?
• Discipline?
• Focus on extracurriculars?

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Choice introduces some inefficiency

• Marginal effect give transfer to student who
  would have gone to public school otherwise
• This is goal of policy
• Inframarginal effect give transfer to student
  who would have gone to private school otherwise
• Not policy goal, but policy has to pay for it

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Cons of vouchers (contd)

• Cons
• Stratification
• What if schools are not like other markets?
• Special education concerns

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What do voucher experiments evaluate?

• Potential gains from vouchers
• (1) Public schools get better when forced to
  compete for students
• (2) Students are served better in private schools
  so moving them from public to private is good
• Lottery studies evaluate effect of private
  schooling on students who enter lottery
• Effect of private schooling now might differ from
  in a fully voucherized world
• Students who enter lottery may differ from other
  students
• Lotteries are too small to exert competitive
  pressure

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Empirical evidence on vouchers

• Rouse (1998) on Milwaukee program
• Students were lotteried into private schools
• Two types of comparisons
• Lottery winners vs. losers
• Lottery winners vs. students in public schools
• Main finding significant positive impact on
  math scores, none on reading

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Evidence from voucher programs in Dayton, OH
NYC and Washington, DC

• Howell, Wolf, Peterson Campbell
• All 3 cities lotteried vouchers (random
  assignment)
• Positive private school effects on test scores
  for blacks but not for other groups
• black participating in pgm Dayton 74 NYC 42
  Washington 94
• Test scores ? about 1/3 of a std. dev. w/ pvt
  school attendance (not just voucher offer)

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Evidence from voucher programs abroad

• Angrist et al. Colombia
• Positive effects for lottery winners on academic
  and non-academic outcomes
• Hsieh Urquiola Chile
• No competition-induced impact on academic
  outcomes
• More sorting

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Hsieh Urquiola