Vouchers

1
Vouchers

• Reading Friedmans website
• http//www.friedmanfoundation.org.
• Gill, Timpane, Ross and Brewer (2001) Executive
  Summary

2
Outline

• The policy problem
• Theoretical Argument
• Economic Theory
• The empirical question
• Ideal Data
• Randomized Experiment
• Natural Experiment
• The Evidence
• The Milwaukee Voucher Experiment

3
The policy problem

• Widespread concern over public school
  performance
• Unfortunately, in recent years our educational
  record has become tarnished. Parents complain
  about the declining quality of the schooling
  their children receive. Teachers complain that
  the atmosphere in which they are required to
  reach is often not conducive to teach Taxpayers
  complain about growing costs Milton Friedman
• While US spending on education has increased
  significantly during the last quarter of century,
  quality of student performance measured by test
  performance has remained roughly constant.
  Eric Hanushek

4
A Popular Proposal

• Policy Interest in Greater Choice
• Increase competition as a means of raising public
  school
• In a more competitive environment, students are
  less captive.
• Public schools are forced to raise quality, given
  resources, to retain enrollment.

5

• To increase choice, different policies have been
  used
• Vouchers
• Tax credits
• allow parents or guardians to claim a tax credit
  on their income taxes for approved educational
  expenses
• Open enrollment
• allows parents to apply for their children to
  attend school districts other than the one in
  which they live
• Charter schools
• schools of choice that are funded by public money
  but are self-governing, operating outside of the
  traditional system of public-school governance
  under a quasi contract or chapter, issued by a
  government agency such as a school district or a
  state education authority
• publicly funded, open to all students.

6

• One way to achieve a major improvement, to bring
  learning back into the classrooms, especially for
  the currently most disadvantaged, is to give all
  parents greater control over their childrens
  schooling, similar to that which those of us in
  the upper-income classes now have. One simple
  and effective way to assure parents greater
  freedom to choose, while at the same time
  retaining present sources of finance, is a
  voucher plan. Milton Friedman
• The adoption of such arrangements would make for
  more effective competition among various types of
  schools and for a more efficient of their
  resources -- Milton Friedman

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Vouchers

• Universal vouchers
• Allowing all parents to direct funds set aside
  for education by the government to their children
  to a school of choice
• Means-tested vouchers
• Enabling income-eligible families to direct funds
  set for education by the govt to a school of
  choice. Examples Milwaukee, Cleveland
• Failing schools vouchers
• Allowing all parents whose children attend public
  schools identified as failing to direct funds set
  aside for education by the govt to a better
  performing school of their choice. Example
  Florida.

8
Parental Pressure

• Some researchers have asserted that schools are
  subject to pressures other than form competition.
  
• If the schools are under reform, parents have
  option of complaining. Collective parental
  pressure has the potential to change the perverse
  effects of vouchers on school quality.
• But in failing schools, parents are usually less
  likely to care about quality of education. (If
  they care enough, they have transferred to
  voucher programs.) If so, the prior perverse
  effect can be strengthened. The stronger
  competition may weaken the positive impact of
  parental pressure on school productivity.

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Focus of the debate

• Proponents argue
• that student using vouchers would be able to
  attend more-effective and more-efficient schools
  
• that the diversity of choices available would
  promote parental liberty, and would benefit poor
  and minority students
• and the competitive threat to public schools
  would induce them to improve.
• Opponents argue
• that vouchers would destroy public schools,
• exacerbate the inequalities in student outcomes,
• increase school segregation
• breach constitutional wall between church and
  state.

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Some Empirical Findings (1)

• Academic Achievement
• Small-scale, experiment privately funded voucher
  programs targeted to low-income students suggest
  a possible (but as yet uncertain) modest
  achievement benefits for African American
  students after one to two years in voucher
  schools (as compared with local public schools)
• But, we still have very little knowledge about
• Why only African American students who switch
  schools are somewhat affected?
• Long-run effects of vouchers on academic skills
  and attainment for students who choose to switch
  schools
• Effects (positive or negative) of vouchers on
  non-choosers, who stay in conventional public
  schools.
• Would vouchers induce failing schools to improve
  quality?

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Some Empirical Findings (2)

• Choice
• Parental satisfaction levels are high in
  virtually all voucher programs studied,
  indicating that parents are happy with the school
  choices made available by the programs.
• But, we still have very little knowledge about
• the quality of schools made available by voucher
  programs
• How many voucher programs are high-quality?

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Some Empirical Findings (3)

• Access
• Programs explicitly designed with income
  qualifications have succeeded in placing
  low-income, low-achieving and minority students
  in voucher schools.
• In most choice programs, however, students with
  disability and student with poorly educated
  parents are somewhat underrepresented. Many types
  of voucher programs are disproportionately used
  by middle- and upper- income families.
• We still cannot explain why certain types of
  parents are less likely to use vouchers although
  they have the options to do better.

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Some Empirical Findings (4)

• Integration
• In communities where public schools are highly
  stratified, targeted voucher programs may
  modestly increase racial integration
• Large-scale unregulated voucher programs are
  likely to lead to some increase in
  stratification.
• We still havent explored
• dynamic integration effects of the system i.e.
  the effects of vouchers on the sorting of
  students across schools (good students cluster in
  a few schools and mediocre students stay in bad
  schools).
• Empirical challenges a full understanding of
  integration effects requires a clear assessment
  of all possible counterfactuals --- what would
  students of different racial/ethnic groups be in
  the absence of vouchers? If there were no
  vouchers, would they still attend public schools?
  Would they pay tuition at racially homogeneous
  private schools?

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Implications for Policy (1)

• Program Scale Matters
• Most empirical studies that found favorable or
  neutral evidence about voucher programs focus on
  escape-valve programs i.e. targeted to small
  number of at-risk students. Small-scale targeted
  voucher programs may produce discrete benefits
  but unlikely to have negative consequences that
  voucher opponents fear.
• So far, the implications of the existing findings
  for larger-scale choice programs are still
  unclear. In particular, if the voucher students
  benefited only because the program put them in
  classrooms in high-achieving peers, then the
  effect might disappear in a larger-scale programs
  that put large numbers of low-achieving students
  in voucher classrooms together.

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• Scale effects are very important when we care
  about integration but there are very limited
  empirical evidence about the effects of
  large-scale voucher programs on integration. On
  contrary to the small-scale programs, universal
  vouchers programs may disproportionately benefit
  highly educated and upper-income families. E.g.
  education tax credits.

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Difficulties of Empirical Studies on Vouchers

• Want to examine the effects of vouchers on
  student academic performance (e.g. test scores)
• If its more likely for students from rich
  families to transfer to voucher choice programs,
  the effect of vouchers on test score will be
  overstated (spurious consequence)

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Ideal Data to Study the Effect of Voucher on
Students Performance

• Start from the existing system, test all students
  using longitudinally comparable test (so we can
  control for student ability).
• Randomly assign half of the students to vouchers
  (as treatment group) and the other students stay
  (as control group)
• Allow the school/students to adjust to new
  system then re-test all students (including both
  control and treatment groups)

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Economic Theory (1)

• Vouchers are one form of government subsidy

Vouchers have no effects on education quantity /
quality
S
Vouchers increase education quantity and quality
P
P
S
D
D
D
D
Q
Q
Q
Q
Q
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A counter-intuitive case
Vouchers decrease education quantity and quality
S
P
D
D
Q
Q
Q
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Intended Consequence and Empirical Questions of
Educational Vouchers

• Academic achievement
• Would vouchers promote the academic skills of the
  students?
• How will vouchers affect the achievement of those
  who remain in assigned public schools?
• Choices
• Would parents have more choices than before?
• Would vouchers induce a supply response that make
  a variety of desirable school options available?

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• Access
• Will vouchers be available to low-income
  residents of inner cities?
• Integration
• Will vouchers increase or reduce the integration
  of students across and within schools and
  communities by race/ethnicity and socioeconomic
  status?

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Controversies (1)

• Would vouchers increase the deficit in the
  states budget?
• Before voucher
• Tax families to provide revenues for public
  schools indirect returning taxes to families
  with children in public schools.
• After voucher
• Directly return the tax revenue to families with
  children. Average cost of a voucher is much less
  than per capita spending on public-school
  students.
• The financial demand on state budgets would be
  greatly reduced. Then it would be even easier to
  give more vouchers to poor families.

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Controversies (2)

• Can it be permissible to use public money to
  finance a school whose main purpose is to advance
  a religious belief?
• The first amendment says Congress shall make no
  law respecting an establishment of religion.
• The Supreme Court in 1973 struck down a New York
  tax credit to parents who sent their children to
  private schools.
• But in 1983 the Minnesota court, in a narrow 5-4
  opinion, seemed to open the way to some subsidy
  of religious schools.

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Controversies (3)

• Can an increase in competition from private
  schools induce public schools to improve
  productivity?
• Important background questions
• How is the overall change in performance split
  between productivity and sorting?
• Productivity/incentives Would vouchers make
  public schools improve their quality by making
  their productivity more efficient and effective?
• Sorting Would vouchers make good students
  transfer to other places from poorly performing
  schools so that the performance of the failing
  schools will even worsen than before?

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Sources of Possible Problems

• Lack of Incentive It is plausible to expect
  schools to have interests that do not coincide
  exactly with those of parents.
• When a voucher is introduced, rent-seeking public
  schools may find it optimal to reduce
  productivity and thus quality. Public schools
  may choose to serve just the low demanders,
  exerting less efforts than previously.
• The perverse effects on school productivity may
  arise.

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Randomized Experiment

• Make receiving the dose purely random.
• Permits direct comparison of students sensitive
  or insensitive to the introduction of vouchers.
• No need to worry about confounding effect of
  unobserved factors because the dose randomly
  distributed.

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Use an Instrumental Variable as Natural Experiment

• The use of an instrumental variable can achieve
  the same end as the randomized experiment.
• To be a valid instrument,
• Uncorrelated with outcome (i.e. test scores)
  conditional on observable factors,
• Predict the student participation.

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The Milwaukee Voucher Experiment

• The first educational voucher program in the
  United States(began in 1990 and expanded in
  1995).
• Means-tested voucher
• Family income cannot exceed 175 of the federal
  poverty guidelines.
• The state of Wisconsin directs payment either to
  the Milwaukee Public School system or the voucher
  schools actual cost, whichever is less, up to
  5,106.
• Mixed findings on effect of vouchers on the
  performance of students who move to private
  schools
• Witte et al. (1995) - No evidence Greene et
  al. (1996) - Positive effects in both reading and
  math Rouse (1998) - Positive effect in math but
  no effect in reading.
• Limited evidence on effect on public school
  performance
• Hoxby (2001) - positive response using two-year
  data.

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Ideal Data to Study the Effect of Voucher on
School Quality

• Start from the existing system, estimate school
  quality using objective and comparable measures.
• Randomly assign half the schools as voucher
  programs (as treatment group) and the other
  schools remain in the conventional system (as
  control group)
• Allow the school/students to adjust to new
  system then re-test all students (including both
  control and treatment groups)

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Would Vouchers Improve Public School
Performance?An On-Going Debate

• (a very short version)
• Epple and Romano (1998)
• Hoxby (1994, 2001)
• McMillan (1999, 2000)

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Introduction

• Private school vouchers
• One of the important purpose is to reduce public
  school monopoly and give parents more choice and
  a greater role in school governance
• Empirical findings are ambiguous or insignificant
• Important policy question
• Would voucher-induced competition from private
  schools pressure traditional public schools to
  become more productive and force the weaker
  school to close?

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Three primary determinants

• Sorting
• Vouchers may make good students transfer to other
  places from poorly performing schools so that the
  performance of the failing schools will even
  worsen than before.
• The remaining students in public schools are
  mostly likely to be those who didnt care about
  school quality (called low demanders)
• Parental involvement
• The greater availability of private schools may
  reduce parental involvement in the public
  schools.
• After sorting, parents who are concerned much
  about the quality of education may have
  transferred to private schools.
• Changing incentives on public school conduct
• In contrast to private schools, which typically
  have significant leeway to select their students,
  public schools cannot be selective and can only
  serve students they have.
• Under rising competition, cost-minimizing public
  schools may find it optimal to reduce quality by
  serving just the low demanders.

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Empirical findings the impact of competition on
public school performance

• Hoxby (2001)
• Look at the fourth-graders achievement in
  Milwaukee public schools before and after the
  expansion of the citys voucher program in 1998.
• Competition has substantial productivity effects
  that outweigh any adverse sorting effects
  (including parental involvement).
• Unable to control for the changing mix of
  students in her treatment and control groups.
• McMillan (1999, 2000)
• After incorporating parental involvement,
  estimation results suggest that competition among
  private schools may have a negative impact on
  public schools.
• Bayer and McMillan (ongoing research)
• Incorporate sorting and parental involvement
• Negative