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Upping the Ante: The Equilibrium Effects of Unconditional Grants to Private Schools

Tahir Andrabi, Jishnu Das, Asim Ijaz Khwaja, Selcuk Ozyurt and Niharika Singh
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Tahir Andrabi: Pomona College
Jishnu Das: World Bank
Asim Ijaz Khwaja: Harvard U
Selcuk Ozyurt: Sabanci U
Niharika Singh: Harvard U

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: We test for financial constraints as a market failure in education in a low-income country by experimentally allocating unconditional cash grants to either one (L) or to all (H) private schools in a village. Enrollment increases in both treatments, accompanied by infrastructure investments. However, test scores and fees only increase in H along with higher teacher wages. This differential impact follows from a canonical oligopoly model with capacity constraints and endogenous quality: greater financial saturation crowds-in quality investments. Higher social surplus in H, but greater private returns in L underscores the importance of leveraging market structure in designing educational subsidies.

JEL-codes: I25 I28 L22 L26 O16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2018-06
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Handle: RePEc:ecl:harjfk:rwp18-019