Events

Authors:

• Ping Ching Winnie Chan
  Statistics Canada

• Robert McMillan
  University of Toronto

This paper measures the effects of increased competition from private schools on public school performance. It takes advantage of the clear exogenous increase in choice associated with Ontario's 2002 tuition tax credit, which eased access to private schools throughout Canada's most populous province, as well as the exogenous reduction when the policy was unexpectedly cancelled. Building on the idea that the policy would have differential competitive effects for public schools in districts with a significant private school presence versus those without, we construct a measure of the in- crease in competition that is specific to each school, combining the province-wide reform with local variation in private school availability. Relating this measure to school outcomes, our 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; when the policy was switched off, such gains were eliminated. The estimates imply that a one standard deviation increase in private school competition generates about one-tenth of a standard deviation improvement in average public school performance. A positive relationship of similar magnitude persists when accounting for fixed unobservables using the within-school gain, and also when instrumenting for private school presence. To assess whether the positive effect is due primarily to increases in productivity, the analysis accounts for a series of alternative mechanisms. Increased sorting is unlikely to be responsible for the public school improvement as there were no significant outflows of Ontario public school students to the private system; and very slight compositional changes in observable public school student characteristics suggest that unobservable changes are likely to have been minor also. There is no evidence of any significant `gaming' on the part of public schools, nor of differential changes in school resources that might explain performance differences. Overall, the Ontario evidence supports the view that increased competition from private schools raises public school productivity, of benefit to students remaining in the public system.