Why do Education Vouchers Fail?
Peter Bearse (),
Buly Cardak (),
Gerhard Glomm () and
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Peter Bearse: University of North Carolina at Greensboro
Gerhard Glomm: Indiana Univeristy
No 2009-014, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington
We examine quantitatively why uniform vouchers have repeatedly suffered electoral defeats against the current system where public and private schools coexist. We argue that the topping-up option available under uniform vouchers is not sufficiently valuable for the poorer households to prefer the uniform vouchers to the current mix of public and private education. We then develop a model of publicly funded means-tested education vouchers where the voucher received by each household is a linearly decreasing function of income. Public policy, which is determined by majority voting, consists of two dimensions: the overall funding level (or the tax rate) and the slope of the means testing function. We solve the model when the political decisions are sequential - households vote first on the tax rate and then on the extent of means testing. We establish that a majority voting equilibrium exists. We show that the means-tested voucher regime is majority preferred to the status-quo. These results are robust to alternative preference parameters, income distribution parameters and voter turnout.
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