Upping the Ante: The Equilibrium Effects of Unconditional Grants to Private Schools

42 Pages Posted: 17 Jul 2018

See all articles by Tahir Andrabi

Tahir Andrabi

Pomona College - Department of Economics

Jishnu Das

Georgetown University; Georgetown University

Asim Ijaz Khwaja

Harvard University - Harvard Kennedy School (HKS); Center for Research on Pensions and Welfare Policies (CeRP); Bureau for Research and Economic Analysis of Development (BREAD); National Bureau of Economic Research (NBER)

Selcuk Ozyurt

Sabanci University; Harvard University

Niharika Singh

Harvard University - Harvard Kennedy School (HKS)

Multiple version iconThere are 2 versions of this paper

Date Written: July 12, 2018

Abstract

We test for financial constraints as a market failure in education in a low-income country by experimentally allocating unconditional cash grants to either one (L) or to all (H) private schools in a village. Enrollment increases in both treatments, accompanied by infrastructure investments. However, test scores and fees only increase in H along with higher teacher wages. This differential impact follows from a canonical oligopoly model with capacity constraints and endogenous quality: greater financial saturation crowds-in quality investments. Higher social surplus in H, but greater private returns in L underscores the importance of leveraging market structure in designing educational subsidies.

Keywords: Private schools, Financial innovation, Educational Achievement, Education Markets, Return to Capital, SMEs

JEL Classification: I25; I28; L22; L26; O16

Suggested Citation

Andrabi, Tahir and Das, Jishnu and Khwaja, Asim Ijaz and Ozyurt, Selcuk and Singh, Niharika, Upping the Ante: The Equilibrium Effects of Unconditional Grants to Private Schools (July 12, 2018). HKS Working Paper No. RWP18-019, Available at SSRN: https://ssrn.com/abstract=3214957 or http://dx.doi.org/10.2139/ssrn.3214957

Tahir Andrabi

Pomona College - Department of Economics ( email )

Claremont, CA 91711
United States
909-607-2513 (Phone)
909-621-8576 (Fax)

Jishnu Das

Georgetown University ( email )

O Street
Washington, DC 20057
United States

Georgetown University ( email )

Old North, Suite 100
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Washington, DC 20057
United States

Asim Ijaz Khwaja (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-384-7790 (Phone)
617-496-5960 (Fax)

Center for Research on Pensions and Welfare Policies (CeRP) ( email )

Via Real Collegio, 30
Moncalieri, Turin 10024
Italy

Bureau for Research and Economic Analysis of Development (BREAD) ( email )

Duke University
Durham, NC 90097
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Selcuk Ozyurt

Sabanci University ( email )

SSBF
Orhanli Tuzla
─░stanbul, 34956
Turkey

HOME PAGE: http://myweb.sabanciuniv.edu/ozyurt/

Harvard University ( email )

Littauer Center
Cambridge, MA 02138
United States

HOME PAGE: http://myweb.sabanciuniv.edu/ozyurt/

Niharika Singh

Harvard University - Harvard Kennedy School (HKS)

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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