Cost Savings from Pupil Migration to Private Schools

Abstract:     
Considerable disagreement exists over the magnitude of potential savings to public school boards associated with the migration of public school students to independent schools in connection with voucher or tax credit plans being considered by many states in the US. This paper argues that the appropriate measure of any such savings is the marginal cost of a student. Using three year's worth of school level data for South Carolina, a cost function for a school is estimated. We find that though some costs are fixed, variable costs comprise about 80 percent of school costs. Moreover, variable costs are very sensitive to changes in enrollment. When estimated in first differences on year-to-year changes, the hypothesis that these costs vary in strict proportionality to enrollment cannot be rejected at generally accepted levels of confidence. We find that these potential savings lie in the range of $4,000 to $5,000 per student. Costs are estimated separately for elementary, middle and high schools as well as for disabled, gifted and regular students.

Number of Pages in PDF File: 20

Keywords: Pupil Marginal Cost, Cost Savings, Public Schools, Pubilc School Migration

JEL Classification: I22, D00, D20

working papers series