Nechyba, T. J., (2003)

‘Introducing School Choice into Multidistrict Public School Systems’

in Hoxby, C. (ed.), The Economics of School Choice, University of Chicago Press

• A theoretical paper developing a general equilibrium model to predict the impact of major school vouchers programs on – school quality, the housing market, segregation by income, and taxation.
• Uses observable outcomes from the current system in New Jersey (which does not have a voucher scheme) to calibrate the model, then simulates several different voucher programs.

Key results:

• Two opposing effects emerge as vouchers are introduced -

1. A price incentive for private-school attending households to settle in the poorest district (where housing is cheaper), raising average income in that district.

2. A narrowing of inter-district housing price differences (as more private school households settle in poor district) reducing the price incentive to live in the poorest district.

• Under the assumption that public schools respond to competition by raising productivity, vouchers lead to increased public school quality, increased overall average school quality, and variance in education outcomes falls.
• Under the (pessimistic) assumption that public schools do not respond to competition, vouchers still have only a modest negative impact on public school quality.
• Since, in the absence of vouchers, school quality is capitalised into house prices, the introduction of vouchers leads to capital losses for homeowners in the richest districts.

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