Rajashri Chakrabarti

Can Increasing Private School Participation and Monetary Loss in a Voucher Program Affect Public School Performance? Evidence from Milwaukee

The Milwaukee voucher program, as implemented in 1990, allowed only nonsectarian private schools to participate in the program. However, following a Wisconsin Supreme Court ruling, the program was expanded to include religious private schools in 1998. This second phase of the voucher program led to more than a three-fold increase in the number of private schools and almost a four-fold increase in the number of choice students. Moreover, because of some changes in funding provisions, the revenue loss per student from vouchers increased in the second phase of the program. This paper analyzes, both theoretically and empirically, the effects of these changes on public school performance (as measured by test scores) in Milwaukee. It argues that voucher design matters and that the choice of parameters in a voucher program is crucial in determining the effects of public school incentives and performance. In the context of a theoretical model of public school and household behavior, the paper establishes that the policy changes will lead to an improvement of the public schools in the second phase of the program as compared with the first phase. Following Hoxby (2003a, 2003b) in the classification of treatment and control groups and using 1987-2002 data and a difference-in-differences estimation strategy in trends, the paper then shows that the theoretical prediction is validated empirically. This result is robust to alternative samples and specifications and survives robustness checks, including correcting for mean reversion.

Do Vouchers Lead to Sorting Under Random Private-School Selection? Evidence from the Milwaukee Voucher Program

This paper analyzes the impact of voucher design on student sorting in the application and enrollment phases of parental choice. Much of the existing literature investigates the question of sorting where private schools can screen students. However, the publicly funded U.S. voucher programs require private schools to accept all students unless oversubscribed and to pick students randomly if oversubscribed. In the context of a theoretical model, this paper argues that this feature coupled with the absence of topping up of vouchers can preclude sorting by income in the application stage, although there is still sorting by ability. This design can avert sorting by ability in the enrollment stage, but revelation of new monetary costs can lead to sorting by income. Using a logit model and student level data from the Milwaukee voucher program for 1990–1994, this study finds robust evidence that this indeed has been the case in reality.

Incentives and responses under No Child Left Behind: Credible threats and the role of competition

The No Child Left Behind law mandated the institution of adequate yearly progress (AYP) objectives, on which schools are assigned a pass or fail. Fail status is associated with negative publicity and often sanctions. In this paper, I study the incentives and responses of schools that failed AYP once. Using data from the Wisconsin Department of Public Instruction and regression discontinuity designs, I find evidence in these schools of improvements in high-stakes reading and spillover effects to low-stakes language arts. The patterns are consistent with a focus on marginal students around the high-stakes cutoff, but this improvement did not come at the expense of the ends. Meanwhile, there is little evidence of improvement in high-stakes math or in low-stakes science and social studies. Performance in low-stakes grades suffered, as did performance in weaker subgroups despite their inclusion in AYP computations. While there is no evidence of robust effects in either test participation or graduation, attendance improved in threatened schools where it mattered for AYP. Finally, there is strong evidence in favor of response to incentives: Schools that failed AYP only in reading and/or math subsequently did substantially better in those subject areas. Credibility of threat mattered. AYP-failed schools that faced more competition responded more strongly and also more broadly, robust evidence in favor of improvements in all AYP objectives.

The Economics of Parental Choice

One of the most important decisions that parents make regarding their children is the choice of their schools. This article reviews the economic aspects of parental choice of schools. We analyze the basic economic theory underlying a family’s choice of schools and then examine various dimensions of it, particularly as it relates to the organization of schools and provision of education in the real world. In the process, we also discuss the role played by school demographics, peers, academic performance, school location, school atmosphere, and the availability of information in parental choice decisions and highlight contributions that have significantly increased our understanding of this important issue.

Housing markets and residential segregation: Impacts of the Michigan school finance reform on inter- and intra-district sorting

Local financing of public schools in the U.S. leads to a bundling of two distinct choices – residential choice and school choice – and has been argued to increase the degree of socioeconomic segregation across school districts. A school finance reform, aimed at equalization of school finances, can in principle weaken this link between housing choice and choice of schools. In this paper, we study the impacts of the Michigan school finance reform of 1994 (Proposal A) on spatial segregation. The reform was a state initiative intended to equalize per pupil expenditures between Michigan school districts and reduce the role of local financing. We find that Proposal A led to a decline in neighborhood sorting within education markets, as measured by changes in the value of housing stock and several socioeconomic indicators. We also find that the reform affected the dispersion of incomes and educational attainment within school districts, increasing within-district heterogeneity in the lowest spending school districts, while decreasing the same in the highest spending districts. However, there is a continued high demand for residence in the highest spending communities. These findings are robust to various alternative definitions of “education market”, and survive several sensitivity checks. These spatial segregation patterns are not replicated in neighboring Ohio that did not face similar school finance equalization.

Do vouchers lead to sorting under random private school selection? Evidence from the Milwaukee voucher program

This paper analyzes the impact of voucher design on student sorting in the application and enrollment phases of parental choice. Much of the existing literature investigates the question of sorting where private schools can screen students. However, the publicly funded U.S. voucher programs require private schools to accept all students unless oversubscribed and to pick students randomly if oversubscribed. In the context of a theoretical model, this paper argues that this feature coupled with the absence of topping up of vouchers can preclude sorting by income in the application stage, although there is still sorting by ability. This design can avert sorting by ability in the enrollment stage, but revelation of new monetary costs can lead to sorting by income. Using a logit model and student level data from the Milwaukee voucher program for 1990–1994, this study finds robust evidence that this indeed has been the case in reality.

Precarious slopes? The Great Recession, federal stimulus, and New Jersey schools

While only a sparse literature investigates the impact of the Great Recession on various sectors of the economy, there is virtually no research on the effect on schools. This article starts to fill the void. The authors make use of rich panel data and a trend-shift analysis to study how New Jersey school finances were affected by the onset of the recession and the federal stimulus that followed. Their results show strong evidence of downward shifts in total school funding and expenditures, relative to trend, following the recession. Support of more than

The impact of the Great Recession on school district finances: evidence from New York

2 billion in American Recovery and Reinvestment Act funding seems to provide a cushion in 2010: While funding and expenditures still fall relative to pre-recession levels, they decline less than in 2009. The infusion of federal funding coincides with significant cuts in state and local support, and the authors mark sharp changes in New Jersey?s relative reliance on the three sources of aid. An examination of the compositional shift in expenditures suggests that the stimulus may have prevented declines in categories linked most closely to instruction. Still, budgetary stress seems to have led to sizable layoffs of nontenured teachers, resulting in an increase in median teacher salary and median experience level. Furthermore, high-poverty and urban school districts were found to sustain larger resource declines than more affluent and less populated districts did in the post-recession era. The study?s findings offer valuable insight into school finances during recessions and can serve as a guide to aid future policy decisions.

Did Cuts in State Aid During the Great Recession Lead to Changes in Local Property Taxes

Despite education’s fundamental role in human capital formation and growth, there is no research that examines the effect of the Great Recession (or any other recession) on schools. Our paper begins to fill this gap. Exploiting detailed data on school finance indicators and an analysis of trend shifts, we examine how the Great Recession affected school funding in New York State. While we find no evidence of effects on either total revenue or expenditure, there were important compositional changes to both. There is strong evidence of substitution of funds on the revenue side — the infusion of funds from the federal stimulus occurred simultaneously with statistically and economically significant cuts in state and local financing, especially the former. On the expenditure side, instructional expenditure was maintained, while other categories such as transportation, student activities, and utilities suffered. Important heterogeneities in experiences are also observed by poverty level, metropolitan area, school district size, and urban status. Affluent districts were hurt the most; the New York City metro area, especially Nassau County, sustained the largest losses in terms of both revenue and expenditure. Our findings promise to facilitate an understanding of how recessions affect schools and of the role policy can play in mitigating the consequences.

Unintended Consequences of School Accountability Policies: Evidence from Florida and Implications for New York

During the Great Recession and its aftermath, state and local governments’ revenue streams dried up due to diminished taxes. Budget cuts affected many aspects of government; in this paper, we investigate whether (and how) local school districts modified their funding and taxing decisions in response to changes in state aid in the post-recession period. Using detailed district-level panel data from New York and a fixed effects as well as an instrumental variables strategy, we find strong evidence that school districts did indeed respond to state aid cuts in the post-recession period by countering the cuts. In comparison with the pre-recession period, a unit decrease in state aid was associated with a relative increase in local funding per pupil. To further probe the school district role, we explore whether the property tax rate, which districts set each year in response to budgetary needs, also responded to state aid cuts. Indeed, we find that relative to the pre-recession period, the post-recession period was characterized by a strong negative relationship between the property tax rate and state aid per pupil. In other words, after the recession a unit decrease in state aid was associated with a relative increase in the property tax rate in the post-recession period (in comparison with the pre-recession period).