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Why do Education Vouchers Fail?

Peter Bearse (), Buly Cardak (), Gerhard Glomm () and B Ravikumar
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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

Abstract: 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.

Date: 2009-08
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