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Is Education Consumption or Investment? Implications for the Effect of School Competition

W. Bentley MacLeod, Miguel Urquiola

NBER Working Paper No. 25117
Issued in October 2018
NBER Program(s):Development Economics, Economics of Education, Labor Studies

Many observers have argued that giving parents freedom to choose schools would improve education (Friedman, 1955). We review the evidence, and find little indication that households systematically prefer higher value added schools. We show that this can be explained using a competitive labor market model that takes into account both student and employer choice. The setup implies that households will often rationally prefer schools with high absolute achievement rather than high value added. As a result, school choice can exacerbate inequality without improving opportunities for the most disadvantaged students.

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Document Object Identifier (DOI): 10.3386/w25117

 
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