Does Competition Among Public Schools Benefit Students and Taxpayers?

Caroline Minter Hoxby

NBER Working Paper No. 4979
Issued in December 1994
NBER Program(s):Public Economics

Many school choice proposals would enable parents to choose among public school districts in their area, though not among private schools. Theory predicts three reactions to easier choice among public schools: increased sorting of students and parents among schools; easier choice will encourage competition among schools, forcing them into higher productivity (better student performance per input); easier choice among public schools will give parents less incentive to send their children to private schools. I examine easing choice among public schools using exogenous variation in the concentration of public school districts in metropolitan areas measured by a Herfindahl index on enrollment shares. The exogenous variation is generated by topography: I derive instruments for concentration from natural boundaries (rivers) that partially determine district size. I find evidence that easier choice leads to greater productivity. Areas with greater opportunities for choice among public schools have lower per-pupil spending, lower teacher salaries, and larger classes. The same areas have better average student performance, as measured by students' educational attainment, wages, and test scores. Performance improvements are concentrated among white non-Hispanics, males, and students who have a parent with at least a high school degree. However, student performance is not worse among Hispanics,African-Americans, females, or students who do not have a parent with a high school degree.Also, student performance improves at both ends of the educational attainment distribution and test score distribution.

download in pdf format
   (970 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4979

Published: Hoxby, C. M. "Does Competition Among Public Shools Benefit Students And Taxpayers," American Economic Review, 2000, v90(5,Dec), 1209-1238. citation courtesy of

Users who downloaded this paper also downloaded* these:
Hoxby w8873 School Choice and School Productivity (or Could School Choice be a Tide that Lifts All Boats?)
Angrist and Krueger w4067 Estimating the Payoff to Schooling Using the Vietnam-Era Draft Lottery
Hoxby w4978 Do Private Schools Provide Competition for Public Schools?
Hoxby w11216 Competition Among Public Schools: A Reply to Rothstein (2004)
Rothstein w11215 Does Competition Among Public Schools Benefit Students and Taxpayers? A Comment on Hoxby (2000)
NBER Videos

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

Contact Us