Allocative inefficiency and school competition

Shawna Grosskopf, Kathy J. Hayes, Lori Taylor and William Weber

No 9708, Working Papers from Federal Reserve Bank of Dallas

Abstract: A substantial literature indicates that the public school system in the United States is inefficient. Some have posited that this inefficiency arises from a lack of competition in the education market. On the other hand, the Tiebout hypothesis suggests that public schools may already face significant competition. In this paper, the authors examine the extent to which competition for students influences public school inefficiency in Texas. They use a Shephard input distance function to model education production and use bootstrapping techniques to examine allocative inefficiencies. Switching regressions estimation suggests that school districts in noncompetitive metropolitan areas are more than twice as allocatively inefficient as school districts in competitive metropolitan areas.

Pages: 29 pages
Date: 1997
Note: Published as: Grosskopf, Shawna, Kathy Hayes, Lori L. Taylor and William L. Webster (1998), "Allocative Inefficiency and School Competition," Proceedings, Annual Conference on Taxation and Minutes of the Annual Meeting of the National Tax Association 91: 282-290.
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