Benefits of competition

By Eric Crampton 10/01/2014 3


A few years ago, Jerry Hausman showed that Wal-Mart does a lot to benefit even consumers who don’t shop there. When a Wal-Mart opens, competitor local supermarkets cut their prices to keep customers. And poor customers reap most of the benefits.

Figlio and Hart, in the latest AEJ: Applied Economics, show a similar effect with school vouchersAn ungated version is here.

Suppose your worry about school vouchers is that low social capital parents’ stick with a local underperforming school while kids whose parents have better social capital all flee with their vouchers to the better private schools. And suppose further that you care way more about the potential losses to the former than about the gains for the latter. You might then oppose voucher systems.

Figlio and Hart show that public schools facing competitive pressure from private schools under a new voucher system provided stronger student score improvements. All that concern about kids left behind as the private schools cream off the best voucher kids? Not much of an issue if the public schools facing the competitive pressures perform better as consequence. They find the biggest positive effects in public schools facing strong financial incentives to retain low-income students.

Their identification strategy’s pretty decent, exploiting the timing of the voucher roll-outs across the state. But do go have a look to see if they’ve accounted for your particular objections. And then update your priors.


3 Responses to “Benefits of competition”

  • Interesting to the extent that you (generic you, not specific) understand test scores as the best measure of quality education outcomes.

    Another interpretation could be that schools narrow the curriculum and teach specifically to achieve maximised test outcomes at the expense of wider educational aims. This would have the effect of reducing the educational opportunities for students, and I suspect, reducing their exposure to new, innovative subject matter – the sort of stuff that supports (if not drives) medium to long term economic growth and innovation.

    Potential for an own goal then, if the system merely incentivises behaviour that focuses on narrow measures.

    • Please feel free to re-run their study using other data on other measures. This is one important measure, hardly the only one though. And it very nicely rebuts one common criticism of vouchers: that they will lead to worse outcomes in the left-behind students in public schools. On one important measure, they don’t.

  • Hey, don’t shoot the messenger! I’m merely pointing out that the measure chosen (which, as the authors note, shows only a “modest” improvement) is a very narrow measure of performance in the first instance.

    The importance of the measure I can’t assess as I haven’t looked into what educational performance the tests measure, and the authors didn’t clarify this (or I couldn’t find it in a quick scan of the document). There is no validity data given for the test system either – I’d assume, being state applied it has validity, but then that’s what they thought in Chicago before uncovering mass fraud in the assessments carried out. Hell, even NZQA has validity problems…

    So, does this nicely rebut criticisms? Well, its one study that seems to, but I don’t consider one swallow a summer indicator.