South-Western College Publishing - Economics  
School Choice Programs Get Empirical Support Globally
Topic Market Failure, Regulation and Public Choice
Key Words vouchers, education, choice, competition
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Reference ID: A161191756

News Story School choice programs tend to bring out polarized opinions. And supporters have just received more support for their argument that vouchers improve educational attainment.

Heralded by economist Milton Friedman since 1955, under school choice, parents are given vouchers for their children's education. They can choose to remain in public schools, and the vouchers act like property tax payments to the school system - as they traditionally would. However, they can also use the vouchers to attend a private school (perhaps to cover some/all of the tuition) - or any public school of their choice. The school revenues then follow the buyers, not the sellers, of education. Proponents suggest that programs such as these make schools more competitive, increase educational opportunity, and improve student performance. Opponents argue that vouchers work for the best off, and those unable to take advantage of the system remain in sub-par school systems; in effect, opponents argue that vouchers increase the educational inequality that currently exists.

Based on several international voucher programs, it appears that the proponents of vouchers are winning that argument. These programs allocated vouchers randomly, allowing for a true test of the effectiveness of the program itself, as opposed to other fixed factors inherent in the recipients. In one program in Colombia, children with vouchers were 15-20% more likely to finish secondary education, and five percent less likely to repeat a grade. In other words, the students with vouchers improved relative to those without vouchers. Similar conclusions are being seen in Chile and Sweden.

There have been eight local voucher programs in the US, and of those eight, seven showed significant increases in student achievement for those individuals receiving vouchers, and the eighth was not designed well enough to be included. All of this leads one Harvard economist to conclude that vouchers make schools more competitive, and when schools must compete for students, they will perform better, and all students will be better off.

Discussion Questions:
1. Using a graph of supply and demand, indicate the impact of a voucher program on both a low-performing school and a high-performing school.
2. Why would a school voucher program increase inequality across schools?
3. Some would argue that one of the roles of government is to provide universal education because of the positive external social benefits from education; and this education is to provided to all, not to just the few receiving and using vouchers. Does this program negate that role for government? Why or why not?
Multiple Choice/True False Questions:
1. True/False. Under a school voucher system, schools receive their funds based on where a child lives.

2. True/False. Under a voucher system, any student can attend any school s/he wishes, for free.

3. Under such a program, what would happen to tuition at a high-achieving private school receiving vouchers?

  1. Tuition should rise because demand has increased.
  2. Tuition should fall because demand has increased.
  3. Tuition should rise because demand has decreased.
  4. Tuition should fall because demand has decreased.
Source "Free to Choose, and to Learn," The Economist. May 3, 2007.
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