Competition and Private School Vouchers

This paper examines the theoretical presumption that private school vouchers will increase the quality of education in public and private schools. Even in simple models that assume public education is plagued by X-inefficiency or budger-maximizing administrators, the effect of vouchers on quality are ambiguous. The primary reason for the ambiguity is that vouchers may reduce the enrollment response to changes in public-school quality by placing different households at the margin of deciding between public and private education. The ambiguity also stems from situations where public cost-cutting responses completely dominate quality responses and where private-school quality falls.