Choose or lose? The impact of choice on quality and efficiency in American public education

Since the reforms of the early 1900's, many problems have plagued our public education system and its corporate-bureaucratic model: while educational spending in the United States has soared, standardized test scores have declined, American performance in international comparisons has been poor, and the drop-out rate has reached over 25 percent nationwide. These problems have raised great concerns about the quality and cost of public education in the United States, and this concern--coupled with evidence that suggests a positive role for competition in education--has led many groups to call for "school choice" as a solution to our educational problems and as an alternative to the corporate-bureaucratic model of schooling. Not much is known, however, about the performance of choice since most of the discussion about it has been conducted in the absence of any empirical evidence. This dissertation is extremely significant, therefore, in providing one of the only empirical tests of the theory of school choice. After first deriving the theoretical underpinnings of choice, this study uses Tiebout's model of local public competition as a means for examining the impact of choice on educational quality and efficiency without resorting to comparisons of public and private schools. Only three other studies have previously employed this approach, and of these few studies, this dissertation is the only one to use true measures of efficiency with good controls for output quality and the appropriate unit of analysis. After thus building a unique model of public school competition, an empirical test of the model is provided using ordinary least squares regression analysis and data collected from all school districts in New York state. The results obtained with the improved model differ from previous empirical studies of choice. Unlike the comparison studies of public and private schools, I find highly limited relationships between competition and quality. Furthermore, employing the appropriate unit of analysis and accurate measures of efficiency with good controls for output quality lead to a reversal of most of the current efficiency studies: local public competition in the education arena has a highly limited impact in improving technical efficiency. I conclude that there is limited support for the benefits of local, public competition, and that we must be extremely cautious in applying economic theory based on a market model to non-market institutions. Furthermore, while the data presented here suggest that competition among public schools has limited positive outcomes, I argue that it would be foolish to pursue non-public forms of choice reform without further empirical evidence.