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The Value of Private Schools: Evidence from Pakistan

69 Pages Posted: 1 Jun 2016  

Pedro Manuel Carneiro

University College London - Department of Economics; IZA Institute of Labor Economics

Jishnu Das

World Bank - Development Research Group (DECRG)

Hugo Reis

Banco de Portugal

Abstract

Using unique data from Pakistan we estimate a model of demand for differentiated products in 112 rural education markets with significant choice among public and private schools. Our model accounts for the endogeneity of school fees and the characteristics of students attending the school. As expected, central determinants of school choice are the distance to school, school fees, and the characteristics of peers. Families are willing to pay on average between 75% and 115% of the average annual private school fee for a 500 meter reduction in distance. In contrast, price elasticities are low: -0.5 for girls and -0.2 for boys.Both distance and price elasticities are consistent with other estimates in the literature, but at odds with a belief among policy makers that school fees deter enrollment and participation in private schooling. Using the estimates from the demand model we show that the existence of a low fee private school market is of great value for households in our sample, reaching about 25% to 100% of monthly per capita income for those choosing private schools. A voucher policy that reduces the fees of private schools to $0 (from an average annual fee of $13) increases private school enrollment by 7.5 percentage points for girls and 4.2 percentage points for boys. Our demand estimates and policy simulations, which account for key challenges specific to the schooling market, help situate ongoing debate around private schools within a larger framework of consumer choice and welfare.

Keywords: education, school choice, Pakistan, characteristics model

JEL Classification: I20, I21

Suggested Citation

Carneiro, Pedro Manuel and Das, Jishnu and Reis, Hugo, The Value of Private Schools: Evidence from Pakistan. IZA Discussion Paper No. 9960. Available at SSRN: https://ssrn.com/abstract=2786044

Pedro Carneiro (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Jishnu Das

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Hugo Reis

Banco de Portugal ( email )

148, Rua do Comercio
Lisbon, P - 1101
Portugal

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