Why Do Education Vouchers Fail?
Indiana University Bloomington - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)
University of North Carolina (UNC) at Greensboro - Department of Economics
Buly A. Cardak
La Trobe University - School of Economics
Federal Reserve Bank of Saint Louis
August 16, 2009
CAEPR Working Paper No. 014-2009
We examine quantitatively why uniform vouchers have repeatedly suffered electoral defeats against the current system where public and private schools coexist. We argue that the topping-up option available under uniform vouchers is not suficiently valuable for the poorer households to prefer the uniform vouchers to the current mix of public and private education. We then develop a model of publicly funded means-tested education vouchers where the voucher received by each household is a linearly decreasing function of income. Public policy, which is determined by majority voting, consists of two dimensions: the overall funding level (or the tax rate) and the slope of the means testing function. We solve the model when the political decisions are sequential-households vote first on the tax rate and then on the extent of means testing. We establish that a majority voting equilibrium exists. We show that the means-tested voucher regime is majority preferred to the status-quo. These results are robust to alternative preference parameters, income distribution parameters and voter turnout.
Number of Pages in PDF File: 39
Date posted: August 19, 2009