Crowding in Private Quality: The Equilibrium Effects of Public Spending in Education

66 Pages Posted: 7 Feb 2023

See all articles by Tahir Andrabi

Tahir Andrabi

Pomona College - Department of Economics

Natalie Bau

University of California, Los Angeles (UCLA)

Jishnu Das

Georgetown University; Georgetown University

Naureen Karachiwalla

International Food Policy Research Institute (IFPRI)

Asim Ijaz Khwaja

Harvard University

Multiple version iconThere are 2 versions of this paper

Date Written: January 2023

Abstract

We estimate the equilibrium effects of a public school grant program administered through school councils in Pakistani villages with multiple public and private schools and clearly defined catchment boundaries. The program was randomized at the village level, allowing us to estimate its causal impact on the market. Four years after the start of the program, test scores were 0.2 sd higher in public schools. We find evidence of an education multiplier : test scores in private schools were also 0.2 sd higher in treated markets. Consistent with standard models of product differentiation, the education multiplier is greater for those private schools that faced a greater threat to their market power. Accounting for private sector responses increases the program’s cost effectiveness by 85% and affects how a policymaker would target spending. Given that markets with several public and private schools are now pervasive in low- and middle income countries, prudent policy requires us to account for private sector responses to public policy, both in their design and in their evaluation,

JEL Classification: O12, O15, H44, H52, I22, I25, I28

Suggested Citation

Andrabi, Tahir and Bau, Natalie and Das, Jishnu and Karachiwalla, Naureen and Khwaja, Asim Ijaz, Crowding in Private Quality: The Equilibrium Effects of Public Spending in Education (January 2023). HKS Working Paper No. RWP23-010, Available at SSRN: https://ssrn.com/abstract=4350787 or http://dx.doi.org/10.2139/ssrn.4350787

Tahir Andrabi

Pomona College - Department of Economics ( email )

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

Natalie Bau

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

Jishnu Das

Georgetown University ( email )

O Street
Washington, DC 20057
United States

Georgetown University ( email )

Old North, Suite 100
37th & O Streets NW
Washington, DC 20057
United States

Naureen Karachiwalla

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Asim Ijaz Khwaja (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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