Upping the ante: the equilibrium effects of unconditional grants to private schools

Author(s): Andrabi, Tahir; Das, Jishnu; Khwaja, Asim I.; Ozyurt, Selcuk; Singh, Niharika

Date: 2020

Pages: p. 3315-3349

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We assess whether financing can help private schools, which now account for one-third of primary school enrollment in low- and middle-income countries. Our experiment allocated unconditional cash grants to either one (L) or all (H) private schools in a village. In both arms, enrollment and revenues increased, leading to above-market returns. However, test scores increased only in H schools, accompanied by higher fees, and a greater focus on teachers. We provide a model demonstrating that market forces can provide endogenous incentives to increase quality and increased financial saturation can be used to leverage competition, generating socially desirable outcomes.

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