In 'Trusts' We Trust: Socially Motivated Private Schools in Nepal

58 Pages Posted: 5 Jul 2014

See all articles by Sarmistha Pal

Sarmistha Pal

University of Surrey; IZA Institute of Labor Economics

Bibhas Saha

University of East Anglia (UEA) - School of Economic and Social Studies

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We study school choice and school efficiency in terms of secondary school completion test scores by utilizing a unique database from Nepal. There are two novel features of our analysis: firstly we allow for heterogeneity among private schools, by distinguishing socially motivated trust-run schools from profit-motivated company-run schools, and secondly, we include school's expenditure as a determinant of its efficiency per unit of cost.We find that when expenditure is not included, the trust-run school comes on top, slightly but distinctly, ahead of the profit-motivated school. But if expenditure is included, the trust-run school's position becomes sensitive to the level of expenditure, as it is the only school to exhibit sensitivity between expenditure and test score. In the urban area, the public school is always at the bottom, and between the two types of the private school the trust-run school ranks first (second) at high (low) levels of expenditure. However, in the rural area it is a three way race, with the trust school coming on top again at high expenditure, but falling to bottom at low levels of expenditure. This picture is fairly robust to considerations of subject fixed effects and to inclusion or exclusion of private aided schools or private tuition. We show both theoretically and empirically that socially motivated schools can be efficient and outperform profit-motivated schools.

Keywords: private school heterogeneity, school expenditure per student, efficiency, private school premium, social objectives, private motive, rural-urban dichotomy, Nepal

JEL Classification: H44, I22

Suggested Citation

Pal, Sarmistha and Saha, Bibhas C., In 'Trusts' We Trust: Socially Motivated Private Schools in Nepal. IZA Discussion Paper No. 8270, Available at SSRN:

Sarmistha Pal (Contact Author)

University of Surrey ( email )

Stag Hill
Guildford, England GU2 7XH
United Kingdom
01483 683995 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

Bibhas C. Saha

University of East Anglia (UEA) - School of Economic and Social Studies ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom
+44 0 1603 593404 (Phone)
+44 0 1603 456259 (Fax)


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