Do Private Schools Provide Competition for Public Schools?

NBER Working Paper No. 4978 December 1994 Public Economics

Arguments in favor of school choice depend on the idea that competition between schools improves the quality of education. However, we have almost no empirical evidence on whether competition actually affects school quality. In this study, I use exogenous variation in the availability and cost of private school alternatives to public schools to examine the effects of interschool competition on public schools.

Because low quality in the public schools raises the demand for private schools, we cannot simply compare the outcomes of public school students in areas with and without substantial private school enrollment. Such simple comparisons confound the effect of greater private school competitiveness with the increased demand for private schools in areas where the public schools are poor.

I...