NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Educational Vouchers and Cream Skimming

Dennis Epple, Richard Romano

NBER Working Paper No. 9354
Issued in November 2002
NBER Program(s):   CH   PE   ED

Epple and Romano (1998) show equilibrium provision of education by public and private schools has the latter skim off the wealthiest and most-able students, and flat-rate vouchers lead to further cream skimming. Here we study voucher design that would inject private-school competition and increase technical efficiencies without cream skimming. Conditioning vouchers on student ability without restriction on participating schools' policies fails to effect significantly cream skimming. However, by adding conditions like tuition constraints such as vouchers can reap the benefits of school competition without increased stratification. This can be accomplished while allowing voluntary participation in the voucher system and without tax increases.

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Document Object Identifier (DOI): 10.3386/w9354

Published: Dennis Epple & Richard Romano, 2008. "Educational Vouchers And Cream Skimming," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1395-1435, November.

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