Independent Schools and Long-Run Educational Outcomes: Evidence from Sweden's Large Scale Voucher Reform

This paper evaluates average educational performance effects of an expanding independent-school sector at the compulsory level by assessing a radical voucher reform that was implemented in Sweden in 1992. Starting from a situation where all public schools were essentially local monopolists, the degree of independent schools has developed very differently across municipalities over time as a result of this reform. We regress the change in educational performance outcomes on the increase in the share of independent-school students between Swedish municipalities. We find that an increase in the share of independent-school students improves average performance at the end of compulsory school as well as long-run educational outcomes. We show that these effects are very robust with respect to a number of potential issues, such as grade inflation and pre-reform trends. However, for most outcomes, we do not detect positive and statistically significant effects until approximately a decade after the reform. This is notable, but not surprising given that it took time for independent schools to become more than a marginal phenomenon in Sweden. We do not find positive effects on school expenditures. Hence, the educational performance effects are interpretable as positive effects on school productivity. We further find that the average effects primarily are due to external effects (e.g., school competition), and not that independent-school students gain significantly more than public-school students.