Does Competition Improve Public School Efficiency? A Spatial Analysis

Dissertation, Mississippi State University, 2010

Kaustav Misra

“Proponents of educational reform often call for policies to increase competition between schools. It is argued that market forces naturally lead to greater efficiencies, including improved student learning, when schools face competition. In many parts of the country, public schools experience significant competition from private schools; however, the literature is not clear as to whether public versus private competition generates significant improvements in technical efficiency. A major hurdle for researchers examining this issue is determining a workable definition of competition by which they can measure the degree of competition within local markets. I address this challenge by developing a School Competition Index (SCI) for Mississippi through implementation of several Geographical Information System (GIS) tools. The SCI reveals the degree of competition for each public school based on their spatial location relative to peer private schools operating within their service area. GIS is a unique way to measure the degree of competition among public schools and private schools. Including components of market structure is not sufficient to measure the effects of competition in a market; market characteristics, which vary between locations, are also important. Market characteristics such as, religiosity, school location, and social capital are used in this dissertation as exogenous variables. Two stage stochastic frontier analysis and single equation stochastic frontier analysis are both employed to evaluate school efficiency. This dissertation finds that higher degrees of competition from private schools significantly increase public elementary school efficiency, as measured by the proficiency rates in different examinations. At the same time, competition from private schools does not improve public high schools efficiency. The results suggest that a rural-urban student academic achievement gap persists, and that community social capital stock is also important to some extent. Regardless of model or estimation procedure, students race and socio-economic status significantly reduce public school efficiency. It is anticipated that the current results will inform policymakers regarding the viability of competition-based reforms after considering all these factors.”