Originally published in THE BOSTON GLOBE

Tuesday, May 26, 1998

Public, private students to share gains from aid programs

Raising the curve in education

Martin and Kathleen Feldstein

SCHOOL CHOICE IS ONE OF THE hottest issues in American politics. In addition to their traditional neighborhood school, children in some communities are being offered the chance to attend special semi-independent public schools (the "charter schools") or schools outside the local school district (in "open enrollment" plans) or to use vouchers to attend a private school. Until now, the vouchers for private schools have been financed by private contributions in a small number of communities. But now Congress may be about to provide financial help that will make it easier for all parents to afford private or parochial education.

Last year Congress passed legislation allowing families to set up Education Savings Accounts that could be used to build up savings to pay their childrens college bills. Although contributions to these accounts are not tax deductible, the interest and dividends in these accounts accumulate free of tax, and withdrawals for higher education expenses are not taxed. Now Congress may vote to extend the use of these accounts to cover spending for elementary and secondary schools as well.

Many parents see these new options as the best way to improve their childrens education. But opponents of school choice argue that allowing parents to take their children out of neighborhood schools will hurt the students who remain behind. Although the opposition to school choice is led by the teachers unions who see their jobs and their power threatened, there are also parents who are concerned about the effect of school choice on those students who will remain in public schools.

But contrary to the fear of those parents who oppose school choice, there is now evidence that school choice actually helps those who remain in the traditional public schools. The reason is simple. The availability of choice puts pressure on public schools to do better. If they dont improve, more parents will move their children to the available alternatives.

An important series of studies by Caroline Hoxby, a professor of economics at Harvard University, shows that more school choice means better public schools. The availability of increased choice takes different forms in different locations. More choice in some areas reflects the presence of private schools that offer scholarships to permit broader attendance by those who cannot afford such education on their own. In other areas, more choice reflects greater availability of parochial schools, reflecting the ethnic and religious composition of the local population. And in still other areas more school choice reflects a larger number of small school districts rather than just one or two districts serving an entire metropolitan area. In each case, Hoxby found that more choice means better student performance in the public schools.

Looking at the impact of private schools, Hoxby finds that the achievement of public school students is higher in areas where private schools have the financial resources to subsidize tuition by at least $1,000 per student. The improvement is noticeable whether measured by test scores, or the probability of completing high school and college, or by wages earned later in life. In reaching her conclusion, Hoxby is careful to consider other factors that can influence these school performance measures so that she can isolate the separate effect of the availability of private schools alternatives.

Within the traditional public school system, Hoxby finds that when parents have greater choice among public school districts in a metropolitan area, there is a small but significant increase in students reading and math scores. The competition in the areas with many school districts not only improves test scores but also leads to substantial savings in per-pupil costs.

Hoxby has also analyzed the choice between public and private school and concludes that competition from private schools has little impact on public school spending per pupil. Thats because private schools have two offsetting effects on local public school financing. It is likely that they draw away from the public schools children whose families are likely to support generous public school financing. But, they also reduce the number of children that must be educated at public expense, leading to higher spending per enrolled pupil.

These research findings have implications for the likely impact of voucher programs and of education savings accounts on public school systems. Fears that such programs or existing charter school programs will diminish the quality of the public schools appear to be unwarranted. Further, most proposals are for vouchers that are considerably less than actual per-pupil expenditures, so it is likely that students who use vouchers to attend private schools will free up financial resources that can be spread among the children who remain in the system.

Parents support school choice. They know that American public schools are the most expensive in the world yet do not prepare our children as well as public schools in other countries that spend much less per pupil. The evidence weve just described shows that introducing competition through vouchers and education savings accounts is more likely to improve than to hurt the performance of our public schools. Future research on the effects of experiments with vouchers and with magnet schools is likely to confirm this more indirect evidence. Lets hope that the politicians are listening to the parents and looking at the evidence.

Martin Feldstein, the former chairman of the Council of Economic Advisers, and his wife, Kathleen, also an economist, write frequently together on economics.