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Vouchers for Basic Education in Developing Countries – A Principal-Agent Perspective

School Vouchers

Authors: Varun Gauri and Ayesha Vawda

The World Bank

March 2003

Abstract:  Voucher programs consist of three simultaneous reforms: 1) allowing parents to  choose schools, 2) creating intense incentives for schools to increase enrollment, and 3) granting schools management autonomy to respond to demand.  As a result, voucher advocates and critics tend to talk past each other.  A principal-agent framework clarifies the argument for education vouchers.  Central findings from the literature, including issues related to variance in the performance measure, risk aversion, the productivity of more effort, multiple tasks, and the value of monitoring are found relevant for an analysis of vouchers.  An assessment of findings on voucher programs in industrial countries, as well as a review of voucher or quasi-voucher experiences in Bangladesh, Chile, Colombia, Cote d’Ivoire, and the Czech Republic support the usefulness of the analytic framework.  Gauri and Vawda conclude that vouchers for basic education in developing countries can enhance outcomes when they are limited to modest numbers of poor students in urban settings, particularly in conjunction with existing private schools with surplus capacity.  The success of more ambitious voucher programs depends on an institutional infrastructure challenging to industrial and developing countries alike.

The complete working paper can be accessed here.

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Innovative voucher model from Pakistan

School Vouchers

Shantanu Gupta

In 2006, Punjab Education Foundation (PEF) launched its Education Voucher Scheme (EVS) with an aim to bring education to children belonging to less affluent and underprivileged families, who would otherwise have been deprived from the benefits of schooling. The scheme has been lauded for thoughtful targeting of beneficiaries, appropriate design of incentives for participating schools and built-in learning-based targets that have addressed an important issue of out of school children.

The main features of this scheme that have addressed concerns with regards to the involvement of the private sector in education are the following:

Appropriate targeting of beneficiary

Under EVS, only the most deserving children are identified and registered. Specifically, out of school children (drop outs or those that never went to school), orphans, children of widows and children of single parents were targets for this scheme. Notably, EVS did not target any children already enrolled in government schools, thereby allaying fears that the scheme was an attempt to undermine the value of government schools.

Voluntary participant selection

The EVS schools were selected by inviting expressions of interest from institutions within selected areas through advertisements. Quality inspections of the shortlisted schools from those that applied to be a part of the program, were conducted to assess standards. Student learning assessments and infrastructure checks were used to make a final selection of schools that would participate, and agreements were signed with the approved schools. This invitation process ensured that only interested schools were involved and that standards were maintained such that choice would lead to increased learning outcomes.

Low cost and affordable design

The average cost for the PEF voucher program was PKR 350 per student, which is much lower than traditional programs (approximately a third compared to government expenditure). Vouchers were distributed every 4 months and an additional onetime payment of PKR 1000 for books, stationary, uniforms, bags, belts and shoes was made annually. The affordability of the model makes it affordable, sustainable and scalable.

Measurable and relevant outcomes

Schools empanelled with the EVS were required to positive learning outcomes for the QATs (50% students obtaining at least a 40% mark). Failing this twice successively would automatically lead to the school being excluded from the program for a minimum of two years. In addition, the PEF-EVS has set internal targets for several indicators. Decreasing the number of out of school children, increasing primary school completion rates and increased retention, improved quality of education and learning outcomes, increase in female enrolment, employment opportunities linked with skill development programs, increase in employment opportunities for female teachers were some of the listed indicators. Thus, clearly delineated and measurable outcomes defined the goals of the program.

Incentives

PEF designed strong incentives for schools to participate in the voucher program. The incentives assured a regular revenue for the schools and vouchers were given for 12 months although children attend only 10 months of school. The extra revenue could then be used for school improvement work. EVS is clearly focused on learning outcomes instead of inputs such as teacher qualification or infrastructure norms unlike most other schemes. Additionally PEF conducted professional development programs for the participating schools three times a year in addition to preparing and disseminating lessons plans in schools. On an average there were 50 students’ receiving vouchers in EVS schools where summer camps were conducted to bring these students at par with their peers. Overall, participating schools stated that the program helped improve school quality.

Taking government along

Since EVS targeted only out of school children, the government has been very supportive of this project. PMNL , the ruling party in Punjab has strongly supported this program, particularly the fact that a large number of children been empowered to access schools. Education vouchers is a term that is used without apprehension and anti-voucher agents have been silenced because schools have demonstrated infrastructure improvements .

Thus, with thoughtful targeting of the beneficiaries, designing appropriate incentives for the low cost private schools to participate in the program, built-in learning outcome based targets, EVS has demonstrated a method to solve the problem of out of school children in addition to generate a  positive discourse around vouchers as an effective instrument for access to education.

Currently the program is subsidized by DFID and long term sustainability alternatives are being explored. Pankaj Jain’s Gyanshaala and a model of mobile libraries from Bangalore are models they are exploring from India .

This blog is based on the account given my CCS’ Sujatha Muthayya’s after her recent visit to Pakistan. She met Ambreen Raza – Head of PEF, Maliha – Director of EVS, Shafiq – Asst Director EVS, Mr Khalid – School owner and Saif Hameed – Education Adviser to Chief Minister Punjab and also visited one of the PEF-EVS empanelled school.

This blog was originally posted on Spontaneous Order.

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Potential GOP presidential contender Paul pushing school choice in Chicago visit

School Choice, School Vouchers

18-04-2014

Chicago Tribune

As he considers a 2016 run for the Republican presidential nomination, Kentucky Sen. Rand Paul acknowledges the GOP must go beyond its base and find ways to grow support or it will be unable to elect a national standard bearer.

On Tuesday, Paul comes to Chicago as part of a two-day Midwest push for school choice, attending a forum co-sponsored by the conservative Illinois Policy Institute at Josephinum Academy, an all-female Catholic high school in Wicker Park.

Paul’s visit to traditionally Democratic Chicago, along with a similar stop the next day in Milwaukee, is an attempt to advocate for an issue that he said he believes resonates with voters in major cities.

“I think our party is not big enough to win national elections unless we are able to do something different. We have to realize that what we have put forward in the past is not attracting a large-enough body of voters,” Paul said.

“So I’m a big believer that we need to go after issues like education, like school choice, and look to come to the larger cities. Chicago would be one city where we (Republicans) haven’t done very well,” he said. “So we need to really look to bring in a new message to new people if we want to have a chance.”

With the closing of dozens of schools and a chaotic education environment over the issues of funding and teacher pension costs, Chicago would seem an unlikely stop to promote an issue adamantly opposed by the Chicago Teachers Union and public school advocates.

Paul, however, said the lack of improvement in public schools has hurt primarily “an African-American audience” in major cities, leaving students with few future job opportunities.

Last year, Paul joined with Sen. Lamar Alexander, R-Tenn., in backing legislation to allow federal Title 1 funds for students from low-income families to travel with the student. Funding would take the form of a voucher or certificate to provide school choice, rather than automatically flow to the public schools. A similar plan was advocated by 2012 Republican presidential nominee Mitt Romney.

For the libertarian-leaning Paul, advocating a federal policy on education — traditionally an issue reserved for state and local communities — is a break.

“Right now, we have a large degree of federal involvement and if we’re going to have federal involvement I see no reason why the concept of choice and competition can’t be attached to federal funds,” Paul said.

“I would let it go directly to the poor kids and let them choose which school they want to take it to — public, private or otherwise — and maybe through that innovation and through competition, the schools would get better. I think we can’t just keep doing the same thing and expect a different result,” he said.

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School Vouchers and Student Attainment: Evidence from a State-Mandated Study of Milwaukee’s Parental Choice Program

School Choice, School Vouchers
Authors: Joshua M. Cowen, David J. Fleming, John F. Witte, Patrick J. Wolf, and Brian Kisida
 
The Policy Studies Journal, Vol. 4, No.1, 2013
 

Policymakers and scholars alike have looked to studies of school choice programs for evidence that students do “better” or “worse” in alternatives to the traditional public sector. Nearly all of these studies have focused largely on the performance of students on standardized tests. Many scholars acknowledge and several actually consider the importance of other outcomes, including the effects of school choice on student and parent satisfaction and civic values (e.g., Campbell, 2008; Dee, 2005; Howell, Peterson, Wolf, & Campbell, 2006; Schneider, Teske, Marschall, Mintrom, & Roch, 1997; Wolf et al., 2009) and the indirect effects of school choice on other socially desirable goals such as racial integration and the narrowing of racial, ethnic, and gender gaps in achievement (e.g., Betts, Rice, Zau, Tang, & Koedel, 2006; Bifulco & Ladd, 2007; Greene, 2005; Neal, 2006; Zimmer et al., 2009). As with other school choice programs, studies of school voucher programs have primarily focused on student test scores. These include evaluations of privately funded programs (Cowen, 2008; Howell, Wolf, Campbell, & Peterson, 2002; Howell et al.,2006) and analyses of public programs (Greene, Peterson, & Du, 1999; Metcalf, West, Legan, Paul, & Boone, 2003; Rouse, 1998;Witte, 2000;Wolf et al., 2013). Some of these studies have also reported to varying degrees on other indicators, often finding large and positive voucher effects on parent satisfaction and views of school safety whilealso reporting small or marginal effects on test scores (e.g.,Witte, 2000; Howell et al., 2006; Wolf et al., 2009).

Perhaps the most important alternative to student test scores as a measure of success in educational policy is attainment: reaching a given level of schooling such as a high school diploma, enrollment in post secondary education, or earning a bachelor’s degree and beyond. Educational attainment is an important indicator for school quality because it may be a direct result of the development of academic and life skills related to a variety of valuable outcomes of interest to policymakers and employers. These include regular employment, aversion to criminal and other dysfunctional behavior, and the generation and growth of personal income and savings. Studies have shown that students who have at least a high school degree can expect higher average life expectancy (Meara, Richards, & Cutler, 2008) and that even 1-year increases in education can reduce the probability of dying in the next 10 years (Lleras-Muney, 2005). College attainment is associated with higher levels of overall health (Wirt et al., 2004) and better health care (Muennig, 2005; Rouse, 2005). Not surprisingly, future wealth is also dependent on educational attainment (Day & Newburger, 2002; Heckman & Carneiro, 2003; Rouse, 2005), and this extends the benefits of higher attainment rates beyond the individual to broader social benefits such as increased tax revenue and economic development (Belfield & Levin, 2007). Beyond pecuniary benefits, governments may also see reductions in crime associated with increases in educational attainment (Belfield & Levin, 2009; Levitt & Lochner, 2001). Although such relationships between attainment and future success may not be surprising, graduation rates are still disturbingly low nationwide, especially for boys and particularly in the nation’s largestschool districts (Greene & Winters, 2006).

Despite such importance, attainment is generally not well studied in the literature on school choice. Several early studies examined the effect of attending a Catholic high school on student attainment (Coleman & Hoffer, 1987; Neal, 1997). These studies generally concluded that students graduated at much higher rates if they attended Catholic high schools, especially if they were urban minorities. Graduation and post secondary enrollment are increasingly of interest in studies of other school choice policies. Most notably, a multi state study of charter schools found large attainment gains for students who moved from traditional public schools to charter schools (Zimmer et al., 2009), and a study of public school choice in Chicago indicated modest impacts of choice on the probability of high graduation (Lauen, 2009). In the school voucher literature, only two studies have examined the association between participating in a voucher program and graduating from high school. A recent experimental evaluation of Washington, DC’s federal voucher program concluded that using a voucher increased the likelihood of high school graduation by 21 percentage points (Wolf et al., 2013). An observational study of a limited set of high schools in Milwaukee reported that they graduated their voucher students at a rate about 12 percentage points higher than the system-wide graduation rate for Milwaukee’s public schools (Warren, 2011).

In this article, we consider data from a state-mandated evaluation of the City of Milwaukee’s large, publicly funded school voucher program. We provide evidence that attainment may indeed be related to the school choices families make, at least insofar as these choices pertain to a voucher-funded private or traditional public school. That Milwaukee is a large, urban school district only adds to the importance of the question of whether school choice boosts the levels of student attainment.If quality of life is directly related to educational attainment, if attainment is a direct result of certain schooling conditions to which a student is exposed, and if these schooling conditions may vary as a result of individual parent and student decisions, then the long-term social and economic consequences of school choice programs may be far greater than the impact of such policies on more transitory outcomes like individual test scores. We proceed with our analysis by describing the state-mandated evaluation on which it was based, and the data and analytical procedures we employ. Next we present basic tabulations and statistical models of high school graduation and post secondary enrollment, and consider reasons why students did not complete a high school degree. We then consider the characteristics of postsecondary institutions attended by voucher or public school students. We conclude by presenting several caveats to this work, and by discussing our results in the context of ongoing and future research on public–private differences in student outcomes.

To read more:

http://static.maciverinstitute.com/Policy%20Studies%20Journal%20SCDP.pdf

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A renewed model of education

School Choice, School Vouchers

Livemint

21-01-2014

The recently released Annual Status of Education Report (ASER) on rural education in India contains two main findings. First, learning levels among primary school age children in rural India continue to be shockingly low despite a steady increase in education spending under the Sarva Shiksha Abhiyan (SSA) and the Right to Education (RTE). Second, there has been a steady increase in the fraction of parents abandoning free government schools in favour of fee-charging private schools, with the share of private school enrolment in rural India increasing from 19% in 2006 to 29% in 2013. While reliable annual data does not exist for urban India, the private school share in urban India was estimated at 58% in 2005 (using the Indian Human Development Survey, or IHDS, data), and is likely to be considerably higher in 2013.

The ASER report shows, as do other data sources like IHDS and Young Lives, that students of comparable age and standard in private schools score significantly higher than their counterparts in government schools. However, this doesn’t necessarily mean that private schools caused the better performance of their students. First, students in private schools are more likely to come from socio-economically and educationally advantaged backgrounds. Second, they also typically have 1-2 years of extra schooling (lower kindergarten/upper kindergarten) compared with students in government schools. So, the better performance in private schools could simply reflect these other factors and not the actual effectiveness of the schools. Thus, a critical open question for education in India is this: “Are private schools more or less effective than government schools—holding all other factors constant?”

The Andhra Pradesh “school choice” study

Answering this question is crucial for policy. Clause 12 of the RTE requires private schools to reserve 25% of their seats for students from economically weaker sections (EWS), with the government reimbursing private schools for their fees (up to a maximum of per-child spending in government schools). If public money is going to be used to fund private schools, we need to understand whether private schools are more (or less) effective than government schools after holding all other factors constant.

The Andhra Pradesh school choice project, a long-term research study covering more than 6,000 students in 180 villages for four years (2008-2012), was designed to precisely and credibly answer this question. (The study was carried out under my technical leadership by the Azim Premji Foundation in partnership with the government of Andhra Pradesh, with financial support from the Legatum Institute and the World Bank.) Under the project, we invited parents of children in rural government schools to apply for vouchers (scholarships) that would cover all the costs (fees, books, uniforms) for their children to go to any private school of their choice in the village. The project offered the voucher to two cohorts of students starting in class I and class II, and committed to providing the voucher till the completion of primary school (class V).

The key design feature that enabled a statistically valid comparison between government and private schools was that the scholarship was offered by lottery to a randomly selected subset of applicants. This lottery-based selection thus created a treatment group (those who got the vouchers) and a control group (those who did not)—who were identical, on average, on all other socio-economic characteristics and previous school experience except for winning the lottery. Thus, any differences in education outcomes between the treatment and control groups over time can be attributed purely to the change in schooling environment (made possible by the voucher) and will not be confounded by other factors.

What do private schools do differently?

We find that private school teachers have lower levels of education, training, and experience, and are paid much lower salaries (on average, less than one-sixth of government teacher salaries). However, they have much better measures of effort and time-on-task (lower rates of absence, more likely to be actively teaching and to be in control of the class, when measured during surprise visits to schools). Private schools also have a longer school day and year, significantly lower pupil-teacher ratios, and much lower rates of multi-grade teaching (the lower teacher salaries allow schools to hire significantly more teachers per student). Private schools are also more likely to have functioning toilets (for boys and girls) and scored better on measures of school sanitation and hygiene. Overall, we find that private schools are worse than government schools on input-based measures of teacher quality, but that they do much better on measures of teacher effort and active teaching.

Are private schools more effective?

In Telugu and Maths, we find that the lottery winners who went to private schools don’t perform any better than lottery losers. However, we also found that private schools spend much less instructional time on Telugu (40% less time) and Maths (32% less time), and use this extra time to teach more English, Science/Social Studies (EVS), and also Hindi as a third language (which is not taught in government schools). We find positive effects of vouchers on test scores on all of these subjects (large and significant for Hindi). Thus, adjusting for instructional time, we see that private schools are more productive as they are able to deliver equivalent outcomes as government schools on Telugu/Maths even with substantially less instructional time, and used the extra time to deliver better outcomes on other subjects (especially Hindi).

We also find suggestive evidence of important differences in impact by the medium of instruction of the private school attended. In particular, going to an English-medium private school led to worse scores on Telugu, Maths and EVS, but much better scores on English/Hindi (relative to staying in a government school). However, going to a Telugu-medium private school led to better outcomes on all subjects relative to staying in a government school (but less than English-medium schools in English/Hindi). These results suggest that switching the medium of instruction may hurt accumulation of content knowledge (Maths/EVS) for EWS students. This is consistent with evidence from cognitive neuroscience that first-generation learners are best off being taught in their native language (allowing for reinforcement at home), with English being taught as a subject. The results also suggest that private schools may be even more effective when the medium of instruction is not disrupted. These results, though, are only suggestive and a lot more research is needed in this area.

Finally, it is important to highlight that the average cost per student in private schools was only one-third of the per-child spending in government schools. Thus, even though private schools were not more “effective” in improving learning outcomes in the main subjects of Maths and Telugu, they were clearly more “productive” than government schools, delivering similar outcomes at a much lower cost per student.

Implications for policy

These results suggest that both sides of the public versus private debate need to exercise caution in their recommended policy approaches to improve education quality. Advocates of private schools need to confront the fact that the lottery-winners did not learn more in Maths and Telugu compared with the lottery-losers (suggesting that most of the observed differences between public and private schools reflect socio-economic factors). Given the abysmally low levels of overall literacy and numeracy, they also need to recognize that increasing the share of private-schooling, in its current form, is unlikely to solve India’s education quality problem. While private school teachers are clearly more accountable and work harder than their public school counterparts, it is possible that the binding constraint to education quality lies elsewhere—including a mismatch between the curriculum and student learning levels, and an education system that disproportionately values top-performing students and does not care about helping low-performing students to achieve functional literacy and numeracy and realize their full potential. These systemic pathologies afflict both public and private schools and an excessive focus on private schooling as a panacea may divert attention from fundamental issues of pedagogy and learning.

At the same time, the verdict on government schools is even worse. Empirical research on public education in India has clearly shown that increasing inputs (including teacher qualifications, training and salary) has had no impact on learning outcomes. So advocates of pouring more resources into government schools need to confront the fact that private schools are able to achieve equal or superior outcomes using teachers who are less qualified, and paid much less, suggesting that better management, and greater teacher accountability and effort can compensate for lower qualifications and salaries. In other words, private schools may have a pedagogy problem, but public schools have both a pedagogy problem and a governance problem.

Since private schools achieved equal or better outcomes at one-third the cost, the fundamental question that needs to be asked is, “How much better could private management do if they had three times their current level of per-child spending?” Thus, in addition to focusing on improving the effectiveness of government schools at the current level of spending, the results suggest policymakers should be open to experimenting with models of education provision with public funding (to ensure universal access) and private provision (for better school management).

Overall, policy discussions need to move away from debates of “public” versus “private” provision of education, which are (a) too simplistic because averages hide enormous variation within both public and private schools, and (b) not very useful because both systems are unlikely, in their current form, to deliver significant improvements in outcomes. Rather, the focus should be on the design of better education “systems” that aim to deliver superior outcomes by leveraging the strengths of both the public and the private sector while mitigating the weaknesses of the other. Clause 12 of the RTE provides the ideal context in which to have this discussion of education systems.

Karthik Muralidharan (author) is an assistant professor of economics at the University of California, San Diego.

This is the first of a two-part series.

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Education service delivery State regulations may cause more harm than good: expert

School Vouchers

Jan 19, 2014

Business Recorder

Right to Education legislation offers perverse incentives; education vouchers empowers parents instead of school inspectors. The state regulations on education service delivery may cause more harm than good by denying access to millions of low income families.

This was stated by Mr Parth J. Shah, founder and President of Centre for Civic Society, a New Delhi based top Indian think tank who was the guest speaker on a roundtable ‘Education Vouchers: Lessons from India and Pakistan’ organised by Policy Research Institute of Market Economy (PRIME) in collaboration with Friedrich Naumann Foundation for Freedom.

Parth stressed that school recognition standards in terms of infrastructure requirements pose a serious challenge to the existing low cost, private schools, which are often unable to finance these standards and face a choice between closing down and increasing their fee, causing loss to enrolment in both cases. Around 30% students in Pakistan and 40% students in India are now enrolled in private schools, majority of them are non-elite, low cost and privately owned.

Parth Shah also explained the changed role of government and the new public management which stresses that the role of government should not be of a service provider but that of a financier. Voucher scheme is one such model whereby the government finances it but lets the private sector provide the service. “Vouchers increase the accountability and empower parents rather than inspectors”, he opined.

Speaking on this occasion, Ali Salman, Executive Director of PRIME, gave an overview of education vouchers scheme in Pakistan noticing its growth, success and scalability over last few years from 10,000 students to 150,000 students. He informed the participants that parents of school children are given non-cashable and non-transferable fee vouchers on a quarterly basis. Ali said that the key benefits of these voucher schemes is that they provide choice to parents, offer a cost effective alternative to government financing and improve the learning among these children compared to their peers in government schools.-PR

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Free Market Fairness in Education, Tomasi Style

School Vouchers

Kumar Anand

Senior Associate, Research

Centre for Civil Society

John Tomasi in his book Free Market Fairness makes a case for ‘market democratic’ interpretation of social justice, which he sees as a morally superior account of social justice due to its commitment to both economic liberty and a fair distribution of goods and opportunities, as against the familiar ‘social democratic’ interpretations of social justice. Tomasi differentiates between the two regimes in his book as follows,        

Social democratic regime types do not protect capitalist economic freedoms as basic constitutional rights. As a result, they empower legislative bodies to create and administer monopolies (or heavily regulated quasi-monopolies) in pursuit of socially desirable goods. The constitutional design of market democratic regime types, by contrast, encourages market-based forms of social construction. The market democratic emphasis on capitalistic economic liberties effectively limits the reach of legislative and administrative bureaucracies with respect to distributive issues.

Tomasi also elucidates the importance of decentralised decision making, choice, competition and innovation as seen in a market democratic regime; and its impact on education.

Market democratic regimes thus emphasize market mechanisms in pursuit of a superior system of education and health care for all. Instead of collectivizing decisions, the market democratic strategy is to create systems with the maximum number of decision points. By increasing choice and empowering people to make use of local information available only to them, such regimes aim to encourage innovation and improve performance on the part of the providers. By emphasizing individual choice making, such regimes encourage attitudes of personal awareness and responsibility on the part of ordinary citizens. By unleashing these forces, market democratic regimes hope to create a system that steadily drives up the quality of schooling and healthcare available to all.

Speaking generally, market democratic regimes prefer private over public forms of education, a preference that becomes ever stronger at higher levels of education. Such regime types seek to empower families to decide individually how much to spend on education and which type of school each of their children will attend (if they attend a school at all). By empowering families, market democratic regimes create an environment that encourages educational entrepreneurs to create novel and diverse forms of schooling. The government might play some oversight role in licensing schools and requiring that broad-gauged achievement standards be met.

In Tomasi’s market democratic world, choice for families/students and competition among service providers reign supreme.  

The thrust of schooling within market democratic societies is toward a system of polycentric competition among providers and empowered decision making families.

School choice model of education, through provision of educational voucher to families who in turn spend vouchers at a school of their choice, is one such way of achieving the twin objectives of choice and competition. We delay our progress towards a market democratic society at our own peril.

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Poor Indians Prove Amartya Sen Wrong

School Vouchers

26-09-2013

The Wall Street Journal

Even illiterate parents can make rational choices on schools for their children.

Nobel prize-winning economist Amartya Sen sure has a low opinion of India’s poor. In an interview with Mint newspaper published on July 23, Mr. Sen was asked about cash-transfer programs such as education vouchers. “If you are a peasant farmer and have never been to school, your ability to choose on the basis of information is very limited. Given the asymmetry of information, you’ll never be able to get there,” he said.

Yet the poor in India appear to disagree with Mr. Sen. Parents are increasingly choosing to send their children to low-cost private schools, where students often outperform their peers who attend free public schools.

Surveys suggest that poor Indian parents spend up to 13% of their income on education, well above the national average of 8%. But how do parents who are often illiterate and have little formal education themselves make informed decisions about the merits of schools?

Mr. Sen’s claim rests on two assumptions: that poor parents are incapable of choosing good schools by themselves; and that markets will not help parents identify a good school from a bad one. Evidence suggests neither assumption is true.

Young Indian children play in a classroom at a school in Lucknow, India, Monday, Oct. 31, 2011.

First, the theory that peasants cannot select the best schools is inconsistent with the evidence that they tend to transfer children from failing government schools to better-performing private schools. It is true that poor parents choose schools by considering “simple” things, like whether the medium of instruction is English or the visible state of the building. Yet there is no evidence that such decision-making process favors bad schools.

Research indicates that ordinary people making decisions based on relatively simple data can outperform experts who use much more complex measurements in a wide variety of areas, including predicting Wimbledon winners and picking stock portfolios. Professor Gerd Gigerenzer, a cognitive scientist at the Max Planck Institute, finds that “ignoring part of the information can lead to more accurate judgments than weighting and adding all information.” In other words, one does not need a degree in mechanical engineering to pick a good car.

Mr. Sen’s second assumption is that asymmetrical information makes it impossible for parents to decide which schools are best. The basic idea is that if sellers (low-cost schools) know the quality of a good (education) and buyers (poor parents) have no way of discerning quality, then buyers will either be ripped off or refrain from buying altogether.

However, most of us don’t know how to assemble a computer, manufacture a car engine or even how to make a simple pencil; yet we are able to buy these products fairly regularly. This is because the quality of these products is reflected in their prices. Ever wondered why the price of a car drops as soon as you drive it out of a showroom? The showroom prices include a premium for quality assurance. There is no reason to presume markets are capable of certifying cars but not schools.

In addition, the reality that parents can choose schools creates a market incentive for entrepreneurs to provide better information—in the same way that the market incentivizes the publisher of Consumer Reports to provide other product reviews. Organizations in Hyderabad, southern India, have begun rating low-cost schools so that poor parents can make better choices and better-performing schools can benefit from increased patronage. In fact, surveys by Grey Matters Capital, one such startup, suggest that poor parents are willing to pay up to 150 rupees, roughly $2, for this information.

The real problem is that the education market is still too small to see a proliferation of such certification agencies. Stringent government regulation has meant that most low-cost private schools are not recognized as legal entities. This limits their ability to grow by accessing loans from banks. Legalizing low-cost schools could result in more ratings organizations and increased transparency, ultimately giving poor parents a bigger say in their children’s’ futures.

In his Mint interview, Mr. Sen went on to say, “We need nothing short of a revolution, not an armed revolution, but a revolution in thinking.” The poor are on a mass exodus from government schools to private schools, and the bottom line is that the kids are performing better. It may not be a revolution in thinking but it is most definitely a revolution in doing. Perhaps it is time we treat Indian peasants with a little more respect.

Ms. Vijayalakshmi is a doctoral candidate in marketing at Iowa State University. Mr. Viswanathan is an analyst at Gray Matters Capital, Hyderabad. Mr. Veetil is in the economics doctoral program at George Mason University.

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Cross-border educationists endorse school vouchers

School Vouchers

A team of education activists from Pakistan and members of Delhi-based Centre for Civil Society shared their experience on the ‘school voucher project’ in both countries.

At an event at St Mark’s Convent School in Seelampur in north-east Delhi on Wednesday, Tajamul Hanif from the Pakistan-based National Commission for Human Development said her country fares better in the voucher education system.

The Delhi school voucher project, which was started in 2009 by CCS, pays for the education of poor children in budget private schools. It has benefited over 400 poor students from 68 wards in the Capital.

“Our government is extremely supportive of private intervention in education, though this is not a priority in the country. We are still in the stage of formulating Right to Education laws, which means most schools in Pakistan are not registered,” said Hanif.

CCS plans to present a report of this pilot project to the government so that a voucher system can be used for educating children under the economically weaker section category. The Delhi-based Centre for Media Studies has prepared the report.

With the help of the voucher system, students get the option of choosing their preferred school.

“We aim to convince the government to use this system instead of making schools wait for years to get their due for educating children under the EWS category,” said Shantanu Gupta of CCS.

Under this system, parents were given vouchers worth
Rs 3,600 for a child’s education for a year, which includes school fees, uniform, books, travel and other annual charges. A student should have studied till class six or below at a government school to avail these vouchers. The family concerned must also provide an income certificate to show their financial status.

The CMS conducted the study with 371 voucher students studying from pre-primary to class 8, 371 students attending private schools and 371 students from government schools. Students were tested separately in Hindi, Mathematics and English to evaluate their learning levels.

The findings show that students whose studies were supported by the voucher system performed better than those studying in government schools. They were even at par with students from private schools in all grades.

“Over 50 per cent parents availing the benefits of the voucher system said if this system was stopped, their children would either go back to government schools or stop going to school altogether,” said Gupta.

However, St Mark’s Convent School principal Dr Rajendra Kumar said budget private schools face the threat of closure as they are unable to meet RTE norms laid down by the Delhi government.

“We don’t meet most of the criteria as we do not have space to expand or provide playgrounds and cannot afford to give teachers salaries as per the Sixth Pay Commission,” he said.

Deccan Herald, 15 July 2012

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ON THE POLITICAL ECONOMY OF EDUCATIONAL VOUCHERS

Research, School Vouchers, Vouchers

Author: Epple, D.N and Romano, R

Abstract: Two significant challenges hamper analyses of collective choice of educational vouchers. One is the multi-dimensional choice set arising from the interdependence of the voucher, public education spending, and taxation. The other is that household preferences between public and private schooling vary with the policy chosen. Even absent a voucher, preferences over public spending are not single-peaked; a middling level of public school spending may be less attractive to a household than either high public school spending or private education coupled with low public spending. We show that Besley and Coate’s (1997) representative democracy provides a viable approach to overcome these hurdles. We provide a complete characterization of equilibrium with an endogenous voucher. Click here to read more.

NBER Working Paper 17986, April 2012

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