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Education Policy in Developing Countries$
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Paul Glewwe

Print publication date: 2013

Print ISBN-13: 9780226078687

Published to Chicago Scholarship Online: May 2014

DOI: 10.7208/chicago/9780226078854.001.0001

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Competition and Educational Productivity: Incentives Writ Large

Competition and Educational Productivity: Incentives Writ Large

(p.243) 7 Competition and Educational Productivity: Incentives Writ Large
Education Policy in Developing Countries

W. Bentley MacLeod

Miguel Urquiola

University of Chicago Press

Friedman (1962) suggested that unfettered markets generally ensure efficient provision of goods and services. Applying this logic to education, he recommended that students be provided vouchers to purchase schooling in a free market. Hoxby (2002) agrees, and suggests that more choice increases school productivity. This chapter discusses the evidence in this area, concluding that competition has more mixed and modest impact than expected. This should not be surprising, since economic theory on incentives and incomplete contracts (beginning with contributions from the 1950s) leads to more nuanced expectations. An examination of the incentives faced by schools, parents, and students yields predictions that are broadly consistent with the evidence, and suggests little reason to expect that school choice will dramatically improve test scores. The chapter describes a simple model that illustrates this point and implies that elements of market design might be necessary to ensure that competition enhances educational performance.

Keywords:   Education, developing countries, competition, educational productivity, incentives, private schools, contract theory, market design

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