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Vouchers, Public School Response, and the Role of Incentives

Public Schools, School Choice, Vouchers

Rajashri Chakrabarti

Federal Reserve Bank of New York

Staff Report no. 306

October 2007

Revised November 2010

Abstract: This paper analyzes the incentives and responses of public schools in the context of an educational reform. The literature on the effect of voucher programs on public schools typically focuses on student and mean school scores. This paper tries to go inside the black box to investigate some of the ways in which schools facing the Florida voucher program behaved. The program embedded vouchers in an accountability regime. Schools getting an “F” grade for the first time were exposed to the threat of vouchers, but did not face vouchers unless and until they got a second “F” within the next three years. In addition, “F,” being the lowest grade, exposed the threatened schools to stigma. Exploiting the institutional details of this program, I analyze the incentives built into the system and investigate the behavior of the threatened public schools facing these incentives. There is strong evidence that they did respond to incentives. Using highly disaggregated school-level data, a difference-in-differences estimation strategy, and a regression discontinuity analysis, I find that the threatened schools tended to focus more on students below the minimum criteria cutoffs rather than reading and math. These results are robust to controlling for differential preprogram trends, changes in demographic compositions, mean reversion, and sorting. The findings have important policy implications.

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