The impact of school vouchers on the kindergarten market in Hong Kong

The aim of this thesis is to examine the efficiency of the provision of school vouchers. The voucher scheme launched in 2007 on Hong Kong's kindergarten market is used as a case study to examine the gain in total surplus to government expenditure, and the effects of the eligibility requirements of the voucher scheme on the efficiency of the provision of vouchers. This thesis consists of seven chapters, including the introduction in the first and the conclusion in the last. Chapter 2 presents the literature review of studies on school vouchers and the background and policy setting of the voucher scheme in Hong Kong. Chapter 3 illustrates that the school fees of the voucher kindergartens in Hong Kong continuously decrease from 2006 to 2010. However, there is no significant increase in the attendance rate, proportion of enrolment at voucher kindergartens, and the average enrolment per voucher kindergarten after the launch of the voucher scheme. Chapter 4 estimates the demand for kindergartens by applying the discrete choice demand model with random coefficients. The results indicate that parents have strong preferences regarding the proximity of kindergartens. Moreover, the variation of parents' preferences in school fees is low, while that in the curriculum is high. The simulations conducted in Chapter 5 are for the estimation of the rate of gain in consumer surplus to the provision of vouchers. The results suggest that if all kindergartens are covered by vouchers, the rate of gain in consumer surplus is 96.862% - the highest rate among all the simulation scenarios. In Chapter 6, another set of simulations is conducted to examine the efficiency of the provision of vouchers by taking kindergartens’ price decision into account. The results suggest that if all kindergartens are eligible for the voucher scheme, the rate of gain in total surplus is 91.722%, which is the highest value compared to all the other scenarios with restrictions on kindergartens from joining the voucher scheme. The empirical evidence supports the idea that imposing restrictions on kindergartens from joining the voucher scheme reduces the efficiency of the provision of vouchers