Cheaper by the Dozen: Using Sibling Discounts at Catholic Schools to Estimate the Price Elasticity of Private School Attendance

46 Pages Posted: 3 Nov 2009 Last revised: 10 Nov 2009

See all articles by Susan M. Dynarski

Susan M. Dynarski

National Bureau of Economic Research (NBER); University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy; University of Michigan at Ann Arbor - School of Education

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Danielle Li

Massachusetts Institute of Technology (MIT)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2009

Abstract

The effect of vouchers on sorting between private and public schools depends upon the price elasticity of demand for private schooling. Estimating this elasticity is empirically challenging because prices and quantities are jointly determined in the market for private schooling. We exploit a unique and previously undocumented source of variation in private school tuition to estimate this key parameter. A majority of Catholic elementary schools offer discounts to families that enroll more than one child in the school in a given year. Catholic school tuition costs therefore depend upon the interaction of the number and spacing of a family's children with the pricing policies of the local school. This within-neighborhood variation in tuition prices allows us to control for unobserved determinants of demand with a set fine geographic group fixed effects while still identifying the price parameter. We analyze this variation by using data on over 3700 school tuition schedules collected from Catholic schools around the nation, matched to restricted Census data that identifies precise location that can be matched to the nearest Catholic school. We find that a standard deviation decrease in tuition prices increases the probability that a family will send its children to private school by one half percentage point, which translates into an elasticity of Catholic school attendance with respect to tuition costs of -0.19. Our subgroup results suggest that a voucher program would disproportionately induce into private schools those who, along observable dimensions, are unlike those who currently attend private school.

Suggested Citation

Dynarski, Susan M. and Gruber, Jonathan and Li, Danielle, Cheaper by the Dozen: Using Sibling Discounts at Catholic Schools to Estimate the Price Elasticity of Private School Attendance (October 2009). NBER Working Paper No. w15461. Available at SSRN: https://ssrn.com/abstract=1498962

Susan M. Dynarski (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

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University of Michigan at Ann Arbor - School of Education ( email )

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Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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HOME PAGE: http://web.mit.edu/gruberj/www/

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Danielle Li

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

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