‘Competition Between Public and Private Schools: Testing Stratification and Pricing Predictions.’
Journal of Politcal Economy 88, pp. 1215-1245
Tests for evidence of the stratification by income and ability, both within and across schools, predicted by Epple & Romano's (1998) models.
This stratification pattern implies negative within-private-school relationships between income and ability, at least after controlling for positive correlation between income and ability in the population.
It also predicts a negative within-private-school relationship between ability and tuition.
The authors use panel data from a nationally representative sample of public and private school pupils to test their predictions.
Key results:
The authors find that income and ability are each independently and strongly positively correlated with selection into a top private school.
They find that within a private school (controlling for fixed effects), the relationship between income and ability is statistically indistinguishable from zero.
The authors also find some evidence of ‘discounting to ability’ in the private sector, though they have only an imperfect proxy for tuition-paid.
