NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Anti-Lemons: School Reputation and Educational Quality

W. Bentley MacLeod, Miguel Urquiola

NBER Working Paper No. 15112
Issued in June 2009
NBER Program(s):   ED   LS

Friedman (1962) argued that a free market in which schools compete based upon their reputation would lead to an efficient supply of educational services. This paper explores this issue by building a tractable model in which rational individuals go to school and accumulate skill valued in a perfectly competitive labor market. To this it adds one ingredient: school reputation in the spirit of Holmstrom (1982). The first result is that if schools cannot select students based upon their ability, then a free market is indeed efficient and encourages entry by high productivity schools. However, if schools are allowed to select on ability, then competition leads to stratification by parental income, increased transmission of income inequality, and reduced student effort---in some cases lowering the accumulation of skill. The model accounts for several (sometimes puzzling) findings in the educational literature, and implies that national standardized testing can play a key role in enhancing learning.

download in pdf format
   (705 K)

email paper

This paper is available as PDF (705 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15112

Users who downloaded this paper also downloaded these:
Lavy, Silva, and Weinhardt w15600 The Good, the Bad and the Average: Evidence on the Scale and Nature of Ability Peer Effects in Schools
Caballero w15636 The "Other" Imbalance and the Financial Crisis
Hsieh and Urquiola w10008 When Schools Compete, How Do They Compete? An Assessment of Chile's Nationwide School Voucher Program
Pop-Eleches and Urquiola w16886 Going to a Better School: Effects and Behavioral Responses
Basu and Philipson w15633 The Impact of Comparative Effectiveness Research on Health and Health Care Spending
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us