Upping the ante: the equilibrium effects of unconditional grants to private schools
Andrabi, Tahir and Das, Jishnu and Khwaja, Asim I. and Özyurt, Selçuk and Singh, Niharika (2018) Upping the ante: the equilibrium effects of unconditional grants to private schools. [Working Paper / Technical Report] Sabanci University ID:UNSPECIFIED
We test for financial constraints as a market failure in education by experimentally allocating unconditional cash grants to either one (L) or to all (H) private schools in a village. Enrollment increases in both treatment arms, but test scores, accompanied by fees, increase only in H. This pattern is consistent with a greater focus on infrastructure in L and teacher remuneration in H. It also follows from a canonical oligopoly model of capacity constraints with endogenous quality. Higher social surplus in H, but greater private returns in L underscores the role of competitive forces for the design of educational subsidies.
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