School Choice, Competition, and Public School Performance

Reforms that expand school choice have been the focus of considerable policy interest, not least as a possible means of improving public school performance. According to the standard argument, increased choice will intensify competition, forcing public schools to improve quality in order to retain enrolment. Yet in principle, increased choice need not always raise performance, pointing to the need for careful empirical analysis. A key challenge in measuring the effects of greater choice on school performance is that convincing variation in choice is often hard to come by, especially in cross-sectional studies. And while school choice policy experiments have the advantage that choice increases in a clear way, few large-scale school choice policies have been implemented in North America. An important exception is the 2002 Ontario tuition tax credit, which eased access to private schools throughout Canada's most populous province. Analyzing the effects of the tax credit reform provides the focus of this thesis. The thesis begins by presenting the literature and gaps in existing research. The next chapter presents a model to clarify the link between increases in competition and school performance, and to motivate the empirical identification strategy. To set the stage for the main empirical analysis, I also provide some relevant institutional background relating to the Ontario education policy environment and the Ontario tuition tax credit as well as a descriptive analysis on the Ontario private school market. I then present an initial examination of the possible performance effects of the Ontario tuition tax credit using a difference-in-differences setup, before turning to the main empirical analysis, which exploits the differential competitive effects for public schools in districts with relative to those without a significant private school presence. The empirical results indicate that public school performance improved for schools facing the greatest competitive pressures following the introduction of the policy, controlling for a host of other relevant factors. To assess whether the effect is due primarily to increases in productivity, the analysis controls carefully for a series of alternative mechanisms. Overall, the Ontario findings are consistent with increased choice giving rise to productivity improvements in public schools.Ph