RISE_WP-023_Upping_Ante_Equilibrium Effects_Unconditional_Grants_Pakistan_Andrabietal.pdf (1.98 MB)
Upping the Ante: The Equilibrium Effects of Unconditional Grants to Private Schools
preprintposted on 2022-09-15, 11:16 authored by Tahir Andrabi, Jishnu Das, Asim I. Khwaja, Selcuk Ozyurt
We test for ﬁnancial constraints as a market failure in education in a low-income country by experimentally allocating unconditional cash grants to either one (L) or to all (H) private schools in a village. Enrollment increases in both treatments, accompanied by infrastructure investments. However, test scores and fees only increase in H along with higher teacher wages. This diﬀerential impact follows from a canonical oligopoly model with capacity constraints and endogenous quality: greater ﬁnancial saturation crowds-in quality investments. Higher social surplus in H, but greater private returns in L underscores the importance of leveraging market structure in designing educational subsidies.