Competition and Educational Productivity: Incentives Writ Large

W. Bentley Macleod and Miguel Urquiola

No 7063, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Friedman (1962) suggested that in general, unfettered markets ensure the efficient provision of goods and services. Applying this logic to Education, he recommended that students be provided with vouchers and allowed to purchase schooling services in a free market ((Friedman (1955, 1962)). Hoxby (2002) refines this argument and suggests that more choice will lead to higher school productivity. We discuss the evidence in this area, concluding that the impact of competition has proven to be more mixed and modest than expected. We suggest that this in fact should not be surprising, since economic theory on incentives and incomplete contracts (beginning with many contributions also from the 1950s) leads to a more nuanced expectation. Specifically, an examination of the incentives faced by schools, parents, and students leads to predictions that are broadly consistent with the evidence, and suggests that there is no a priori reason to believe that school choice will dramatically improve test scores. We describe a simple model that illustrates this point and further implies that elements of market design might be necessary to ensure that competition enhances educational performance.

Keywords: information; markets; education (search for similar items in EconPapers)
JEL-codes: D2 D8 I2 J3 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2012-12
New Economics Papers: this item is included in nep-cta, nep-edu and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published - published in: Paul Glewwe (ed.), Education Policy in Developing Countries, Chapter 7, University of Chicago Press, 2013

Downloads: (external link)
https://docs.iza.org/dp7063.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp7063

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().