Demand Shocks and Supply of Schools : Insight from Rainfall Shocks in India

This paper studies the effect of exogenous demand shocks on supply of schools in a market with both private and public schools. Using an all India school level panel constructed from an administrative dataset, we show that negative rainfall shocks increase the likelihood of private school closure but have no impact on public school closure. Entry of local government schools increases in response to shocks showing that these schools provide a buffer. We develop a simple model of a schooling market to interpret our results. To the best of our knowledge, this is the first study to document the impact of economic shocks on the education market. While not covering pandemic years our results shed light on possible changes in the schooling market due to the pandemic