Does Private School Competition H-arm Public Schools? Revisiting Smith and Meier's

Abstract

Smith and Meier (1995a) empirically assess the market hypothesis advanced by Chubb and Moe (1988, 1990), which holds that compettion improves schools. Using Florida school district data, Smith and Meier find that higher private school market share lowers public school test scores; they conclude that competition harms public schools. Hoever, they do not take into account the impact of family income on copetition in traditionally organized education markets: the lower the income, the less likely parents can exit the public schools, which implies less competition. Using their database but segmenting it into low and high income groups, we reanalyze the relationship between test scores and private school market share. We find that private school market share lowers test scores primarily in low income districts, where comptition is least due to low family income. We conclude that Smith and Meier's rejection of the market hypothesis is premature.