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  • 2023
  • Working Paper

Crowding in Private Quality: The Equilibrium Effects of Public Spending in Education

By: Tahir Andrabi, Natalie Bau, Jishnu Das, Asim Ijaz Khwaja and Naureen Karachiwalla
  • Format:Print
  • | Language:English
  • | Pages:66
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Abstract

We estimate the equilibrium effects of a public-school grant program administered through school councils in Pakistani villages with multiple public and private schools and clearly defined catchment boundaries. The program was randomized at the village-level, allowing us to estimate its causal impact on the market. Four years after the start of the program, test scores were 0.2 sd higher in public schools. We find evidence of an education multiplier: test scores in private schools were also 0.2 sd higher in treated markets. Consistent with standard models of product differentiation, the education multiplier is greater for those private schools that faced a greater threat to their market power. Accounting for private sector responses increases the program's cost-effectiveness by 85% and affects how a policymaker would target spending. Given that markets with several public and private schools are now pervasive in low- and middle-income countries, prudent policy requires us to account for private sector responses to public policy, both in their design and in their evaluation.

Keywords

Product Differentiation; Public Sector; Private Sector; Spending; Education; Competition

Citation

Andrabi, Tahir, Natalie Bau, Jishnu Das, Asim Ijaz Khwaja, and Naureen Karachiwalla. "Crowding in Private Quality: The Equilibrium Effects of Public Spending in Education." NBER Working Paper Series, No. 30929, February 2023.
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About The Author

Asim Ijaz Khwaja

Entrepreneurial Management
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More from the Authors

    • August 2020
    • Journal of Political Economy

    Trust in State and Non-State Actors: Evidence from Dispute Resolution in Pakistan

    By: Daron Acemoglu, Ali Cheema, Asim I. Khwaja and James A. Robinson
    • January 2019
    • American Economic Review

    Making Moves Matter: Experimental Evidence on Incentivizing Bureaucrats Through Performance-Based Postings

    By: Adnan Q. Khan, Asim Ijaz Khwaja and Benjamin A. Olken
More from the Authors
  • Trust in State and Non-State Actors: Evidence from Dispute Resolution in Pakistan By: Daron Acemoglu, Ali Cheema, Asim I. Khwaja and James A. Robinson
  • Making Moves Matter: Experimental Evidence on Incentivizing Bureaucrats Through Performance-Based Postings By: Adnan Q. Khan, Asim Ijaz Khwaja and Benjamin A. Olken
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