TheImpactofPrivateSchoolCompetitiononPublicSchoolOutcomesinWisconsin ByPatrickManion pmanion@wisc.

edu April13,2009

2 Abstract:Ianalyzetheeffectofmorecompetitiveprivateschoolsinacounty

onpublicschooltestscoresinWisconsin.Togettheseestimates,Iusethedensityof religiousadherentsasaninstrument.Theresultsshowprivateschool competitivenesshasnostatisticallysignificantimpactonpublicschooloutcomes. I.Summary Thepurposeofthispaperistoanalyzetheeffectofmorecompetitiveprivate

schoolsonpublicschooloutcomesinWisconsin.Iusetheshareofstudentsina countyattendingprivateschoolasaproxyforprivateschoolcompetitiveness.This isbecausefixedcostsmakeupalargepartofschoolexpenses,andsoalarger numberofstudentsattendingaschooldecreasetheperstudentfixedcosts (Bowles).However,areaswithworsepublicschoolsmayhavehighersharesof studentsattendingprivateschools.Toremedythis,Iusethedensityofreligious adherentsasaninstrument.Thiscanbedonebecauseahighpercentageofprivate schoolsarerunbyreligiousorders,andtheyreceivealargeamountoftheirrevenue throughtheaffiliatedchurch(Kealey).Areaswithhigheradherentdensitiesareable todecreasetheirtuition,whichmakesthemamorecompetitivealternativeto publicschooling. Theresultsdonotshowprivateschoolcompetitivenesstohaveastatistically

significanteffectonpublicschooloutcomes.TheestimatesforMathandScience scoreswereeconomicallysignificant,buttheReadingtestswerenotimpactedby privateschoolcompetitiveness.Furtherresearchisrequiredtodetermineif Readingisuniquelyimpacted.

 II.BackgroundInformation

Americaspublicschoolsarenotoriouslylackluster.Inthe50biggestcitiesin

theUnitedStates,only53%ofstudentsgraduatehighschool(CitiesinCrisis).Many proposalshavebeenfloatedtoimprovepublicschooloutcomes,butincreasing competitionisgenerallyviewedwithsuspicion.Thiscouldpartlybeexplainedby thelackofstudiesaboutcompetitionsimpactonpublicschooloutcomes.Inthis paper,IuseanapproachproposedinCarolineHoxbys1994paperDoPrivate SchoolsProvideCompetitionforPublicSchools?toanalyzetheeffectofprivateschool competitiononpublicschooloutcomesinWisconsin.First,thegeneralmodelfor schoolingdecisionsmustbeoutlined. Afamilychooseswheretoliveprimarilybasedonemployment opportunities.Aworkerfirstfindsawillingemployer,andtheworkershousing choiceisthenconstrainedtoareasonablecommutingdistancefromtheirjob.The workercanchosefromavarietyofcitiesbasedonaTieboutsortingmodel.This modelsaysthateachcityofferstheworkerauniquesetoftaxratesandgovernment benefits,andthebenefitsofferedshouldbeequilibratedbythecityspropertytax ratesandpropertyvalues.Theworkerwillchoosethepackagethatmaximizesthe familysutility.Sincetherearemanycitieswithintheworkerscommuting constraint,theareaofanalysisisquiteimportant. Theagenthasavarietyofhousingchoicessowecannotsimplyanalyzeon

theschooldistrictlevel.Withincommutingdistanceofanemployer,therearea widevarietyofschooldistrictswithdifferenttaxratesandschoolquality.Adistrict

 isthentoosmallofananalysisarea.Astatelevelanalysisistoolargeandwillmiss toomuchvariation.Thecountylevelisthenthebestanalysisareasize(Hoxby). Whilesomeworkersmaychosetocommutebetweencounties,themajorityof workerswillfindthiscommutingdistancetoocostly.However,withinacounty, manyworkerswillnotbeabletofindtheiroptimalchoiceofschooling.When

enoughworkersinanareadesireanotherschoolingchoice,aprivateschoolcanbe setup. Aprivateschoolcanbecreatedwhenenoughpeopleintheareaarewillingto

sharetheexpensesofstartingaschoolinadditiontopayingtheirexistingtaxes.The privateschoolsmustthenprovideagreatvaluetothesefamilies.Therearetwo mainwaysprivateschoolscanprovidethis.First,theprivateschoolsmayhave differentproductionfunctionsfromthepublicschools.Theschoolscouldhave greaterefficiencythanpublicschools,theymayprovideadifferenttypeofschooling likeahandsonapproach,ortheymayhavemorefreedominselectingand discipliningstudents.Anotherpossibilityistheprivateschoolshavethesame productionfunctionaspublicschools,buttheyprovideadistinctcurriculum.For example,theparentsmaydesiretheirchildrentogetamorereligiousbased educationoramoreartsbasededucation.Onceaschooliscreated,parentswith thatparticulardemandwouldchosetoliveclosetoandattendthatprivateschool (inmostcases,inthesamecounty).Sincefixedcostsmakeupalargepartofschool expenses,areaswithgreaterprivateschoolenrollmentshouldhavecomparatively lowertuitionwithallotherthingsequal(Bowles).Thisprovidesabasisforouridea

 thatprivateschoolcompetitivenessmayvaryincertainareas.Nowwemust addresshowprivateschoolcompetitivenesscouldaffectpublicschools.

Whiletherearemanywayspublicschoolsmaybeaffectedbyprivateschool

competitiveness,Iwillmentionjustthreemainroutes.Thefirstisthatschooling outcomesandsatisfactionwithpublicschoolsarenotoriouslyhardtomeasure. Whenanareahasfewpublicschoolsorthosethatexisthaveexorbitanttuition, familiescaneitheraccepttheschoolsperformanceormovetoadifferentarea. Whenanareahasanumberofprivateschoolswithmorereasonabletuition,more familiesareonthemarginbetweenpublicschoolingandprivateschooling.Then,if anareahasnotablybadpublicschooloutcomes,morefamilieswillbeabletosend theirkidstoprivateschools.Thenumberofstudentsattendingprivateschoolscan thenprovideanimportantsignaltothepublicschoolsabouttheirown competitiveness.Generally,citieswillnotcompensateforthisbyleavingschool qualitypooranddecreasingtaxes.Anotherpossiblerouteisadirectlyfinancialone. Thecompetitivenessofacityspublicschoolsshouldbecapitalizedinto

housingprices.Ifacityhastremendouspublicschools,morepeoplewillchoseto liveinthatcity,andhousingpriceswillincrease.Thisalsoleadstoanincreasein propertytaxrevenue,andthereforeanincreaseinfundsavailabletothepublic schools.Conversely,ifacityhasterriblepublicschools,itshouldresultinlower revenuefortheschools(OwusuEdusei).However,theeffectmayactuallybethe oppositeforperpupilexpenditures.Ifmorestudentsareleavingthepublicschools, theremaybemorefundsavailableonaperstudentbasis.However,thisshouldnot

 affectcompetitivenessiftheschooladministratorsandteacherscaremoreabout theoverallschoolbudget(andthereforetheirsalaries)thanperpupilbudgets.

Athirdpossiblerouteisthroughthesortingeffect.Privateschoolsmaytake disruptivestudentsoutofthepublicschools,andtherebyincreasethepublicschool outcomes.Theprivateschoolsmayalsotakethebeststudentsoutofthepublic schools,andtherebyreducetheperceivedpublicschooloutcomes.Thereissome evidencethatmorecompetitiveprivateschoolsdodrawgoodstudentsfrompublic schoolsandthereforedecreasepublicschooloutcomes(McEwan).Thiscouldlead toanunderestimationoftheimpactofprivateschoolcompetitivenessonpublic schooloutcomes,butIdonotdirectlyaddressthisduetodataconstraints.Wehave thenexplainedhowprivateschoolcompetitivenessmayimpactpublicschool outcomes,buttherearedistinctstatisticalproblemsinanalyzingthiseffect. Inanareawithpoorpublicschooling,moreparentswillchoosetosendtheir

kidstoprivateschools.Therefore,areaswithahighershareofenrollmentinprivate schools(areaswithmorecompetitiveprivateschools)mayfrequentlyhaveworse publicschools.Thisleadstoasimultaneitybiasinourestimates,anditwillleadtoa downwardestimateoftheeffectofprivateschoolcompetitivenessonpublicschool outcomes.Togetaroundthisproblem,Hoxbyproposesusingthedensityof religiousadherentsasaninstrumentforprivateschoolenrollmentshare. AccordingtotheNationalCenterforEducationStatistics(NCES),81%ofall

privateschoolstudentsintheUnitedStatesattendreligiouslyaffiliatedschools,and byfarthelargestsupplierofreligiousprivateeducationistheCatholicChurch.

 Religiousprivateschoolsareuniqueinthattheyreceiveagreatamountofsupport

fromtheiraffiliatedchurch.Theabilityofalocalchurchtofunditsprivateschoolis directlylinkedtothedensityofadherentsinthegivenarea.Thedensityof adherentscanreducetheprivateschoolcostsandmaketheschoolsmore competitiveinanumberofways.First,churchesusetheirdonationrevenuesto fundtheirprivateschools.Anareawithmoreadherentswillpresumablyhave greaterdonations,andtheprivateschoolmayreceiveagreaterpercentageofits revenuefromthischaritablesource.Theschoolscanthendecreasetuition,since mostreligiousprivateschoolssettuitiontojustcovertheiroperatingcosts.Second, areaswithgreateradherentdensitycandecreasetheprivateschoolsfixedcostsby sharingmoreequipment,buildings,andpersonnel.Third,parentsofthesame denominationaremorelikelytosendtheirchildrentoasimilarlyaffiliatedprivate school.Anareawithgreateradherentdensitywillhavemoreparentsonthemargin betweenpublicandprivateschooling.Lastly,areaswithgreateradherentdensity canhaveagreaterschooldensity(Kealey).Sincetransportationcostsarealarge factorindecidingwhichschooltoattend,thiscertainlyincreasesprivateschool competitiveness. NationwideandWisconsinspecificprivateschooldataisunavailable publicly,buttheNCESreportsthatinthe20032004schoolyearreligiously affiliatedschoolshadsignificantlycheapertuitionthannonsectarianschools.Non sectarianschoolshadanaveragetuitionof$13,419whilereligious(NonCatholic) schoolshadanaveragetuitionof$5,839.Catholicschoolshadanevenless

 expensiveaverageof$4,254.Thisdataseemstoconfirmthatreligiouslyaffiliated schoolsaremorecompetitivethantheirnonsectariancounterparts. III.TheModel Toanalyzetheeffectofprivateschoolcompetitivenessonpublicschool outcomes,IuseapanelIVregression.Thefirstequationis: (1)Yij=Cij+1X1j+2X2j++j

ThejsubscriptindicatesthecountyinWisconsin.Theisubscriptindicates theyearofthedata.Yijisthemeasureofpublicschoolingoutcomesforaparticular year.Iusetheresultsofseveraldifferenttestsadministeredacrossthestateof WisconsintoassessstudentachievementincludingMath,Reading,andScience exams.Cijisthepercentageofstudentsinthecountythatareenrolledinprivate school.ThedifferentXsarevariousdescriptorsofthecounties.Theseincludethe percentagesofvariousracialgroups,thepercentageofresidentslivinginpovertyas definedbythestateofWisconsin,thepercentageofresidentsmakingover$75,000, andeducationindicators.Acomprehensivelistcanbefoundinattheendofthe paper.jisthecountyerrorterm.SinceCjcanclearlyberelatedtoYj,Iusethe densityofreligiousadherentsasaninstrument.Thesecondequationis: (2)Cij=Z1j+j

HeretheZjrepresentstheCatholicdensityintheparticularcountyof Wisconsin.jisthecountyspecificerrorterm.Theuseofreligiousadherentdensity

 asaninstrumentworksbecauseitiscorrelatedwiththeprivateschoolshareof enrollment(competitiveness),butitisunrelatedtopublicschooloutcomes. IV.DataSources Duetothenumerousvariablesthatcanaffectschooloutcomes,Ihave

collecteddatafromfiveseparatesources.Allofthesedatasetsarepubliclyavailable andcontaingeographicdata. ThefirstinformationsourceistheWisconsinDepartmentofPublic

Instructiondatasite.AsrequiredbyWisconsinlawandtheNoChildLeftBehindact, Wisconsinmustreporttheresultsofavarietyofachievementmeasures.Iusedata fromthe20022003,20032004,and20042005schoolyears.FortheMathand Scienceexams,Imeasuredthepercentageofstudentswhoscoredproficientor advanced.FortheReadingexam,Iusedonlythepercentageofstudentswho scoredadvancedbecausetheproficiencyratesweremuchhigherforReadingthan ScienceandMath.Sinceeachschoolwasreportedindividually,Iaveragedthescores ofalltheschoolsinadistrict.Smallschoolswereautomaticallyexcludedbecause Wisconsindoesnotreportdatawithsmallsamplesasindividualresultsmaybe inferred.Irepeatedthisprocedurefromthedistricttocountyleveltogetafinal countyaverage.Ialsosummedthepublicschoolenrollmentfromthesereportsin conjunctionwiththeWisconsinNonPublicenrollmentdata. WhileIcouldnotobtainspecificprivateschooldata,Iwasabletofind

enrollmentdataforprivateschoolsbydistrict.Isummedthisanduseditin conjunctionwiththepublicschoolenrollmentdatatogetavalueforthepercentage

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ofstudentsinagivencountywhoareenrolledinprivateschools.Iusedatafromthe 20022003,20032004,and20042005schoolyears.

Thethirddatasourceisthe2000USGovernmentCensusdata.Iusedthisto obtainvariouscountyspecificvariables.Theseincludethepercentageofthe populationwhoidentifyasCaucasian,Asian,AfricanAmerican,andHispanic.Ialso usethepercentageofpeopleinthecountymakingover$75,000peryear.Itriedtwo differentmeasuresofpoverty:theoverallcountypovertyrateandtheindividual schoolpovertyrates,whichIaveragedtothedistrictandthencountylevel.Both measuresgavesimilarresults.Finally,Iusedthepercentageofpeopleinthecounty withatleastahighschooldiploma. ThefourthdatasourceistheReligiousCongregationsandMembershipStudy

(2000).FromthisIobtainedthedensityofadherentsineachcounty,definedasthe percentageofresidentswhoidentifiedasanadherent.WhileIhaddataonmany differentgroups,IchosetouseonlytheCatholicdensity.Manygroupsdidnothave significantorwidespreadenoughnumberstouseduetohistoricalreasons. ThefifthdatasourceisSchoolsandStaffingSurvey(SASS)dataonpublic

schools.FromthissetItookthesalaryinformationforanewteacherwitha bachelorsdegreeandtheperpupilspendingaverageforeachdistrict.Thesewere averagedandaggregatedtothecountylevel. Intheend,Ihadtoremove4of72counties.Threeofthesewereremoved

duetothelackoftestscores.Thisisbecauseofthesmallschoolsizesinthese

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counties.IalsoremovedthecountyofMenomineebecauseofitsuniquestatusasan Indianreservation. V.Results Overall,privateschoolcompetitivenessdidnothaveastatisticallysignificant

impactonpublicschooloutcomes.Theonlyvariablethathadstatisticallysignificant resultsformorethanonetestscorewasthepercentageofpeopleinthecountywith ahighschooldiploma.Thiscouldbeanindicatoroftheoveralleducationallevelof thecitizensinthecounty,andalsoanindirectmeasureofthequalityofschoolsin thecountyiflargeportionsofhighschoolgraduatesremaininthecounty.Allthree testsshowedthata1%increaseinthepercentageofhighschoolgraduatesina countyincreasesthepercentageofstudentsscoringproficient(MathandScience) oradvanced(Reading)byroughly.5%.Severaloftheothervariableshad economicallysignificantresults.TheMathandScienceresultsweresimilar,andsoI willdiscussthemtogether. TheMathandSciencetestsbothhadmuchhighercoefficientsfortheimpact

ofprivateschoolcompetitiveness.Whilenotquitestatisticallysignificant,the coefficientsindicateda1%increaseinprivateschoolenrollmentshareleadstoa .5%increaseinstudentoutcomes.Surprisingly,thecoefficientonthepercentageof wealthyresidentsinacountywasnegativeforbothtests,butneitherwas statisticallysignificant. TheReadingresultshadalowprivateschoolcompetitivenesscoefficientand nostatisticalsignificance.ItisunclearifReadingissomehowuniquelyaffectedby

 privateschoolcompetition.Ihavefoundresearchsupportingbothsides,andthe

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issueseemstobeunresolvedinacademicliterature.Thecoefficientonpercentage ofwhitesinthecountywasquitestrong,andthiscouldindicatetheobvious advantagewhiteAmericanshaveonanEnglishReadingexam. Ialsofoundthattheperpupilandteachersalaryinformationhadalmostno

impactonstudentoutcomes.Forthisreason,Ichosetoremovethesevariablesfrom thefinalregression. Theseresultsareinteresting,buttheyarealsoinconclusive.Duetothe inherentlysmallnumberofcountiesinWisconsin,Iwasunabletoobtaindefinitive results.Itispossiblemyestimatesweredownwardlybiasedbyschoolsorting,but thisisdifficulttocontrolforwithpublicdata.Clearlythough,thisareaisripefor furtherresearch,andacompetitivesolutiontoourpublicschooltroublesisworth investigating.

 VI.TablesofResults SummaryofData(CountyLevel) Variable %Proficient orBetterin Science %Advanced inReading %Proficient orBetterin Math Mean SD Min Max

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71.30% 7.65% 20.18% 84.84% 50.86% 7.11% 13.26% 67.41%

70.11% 8.39% 17.42% 86.50%

%Students Attending PrivateSchool 10.32% 5.67%

0.34% 24.16%

Xj's used in Regression

%privateschool %poor %rich %HSdiploma %white %foreign %blackand hispanic

Percentage of students enrolled in private school Percentage of people living in poverty, as defined by Wisconsin Percentage of people making over $75,000 per year Percentage of people who have at least 12 year of education Percentage of people who identify as Caucasian Percentage of people who are foreign born Percentage of people who identify as Hispanic or Black

 %StudentsProficientorBetterinMath Variable %privateschool %poor %rich %HSdiploma %white %foreign %blackandhispanic %StudentsProficientorBetterinScience Variable %privateschool %poor %rich %HSdiploma %white %foreign %blackandhispanic Coefficient SE ZStat Coefficient SE ZStat

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0.531 0.360 1.470 0.022 0.659 0.030 0.309 0.213 1.450 0.603 0.294 2.050 0.278 0.230 1.210 1.100 0.785 1.400 0.000 0.238 0.000

0.492 0.336 1.470 0.250 0.615 0.410 0.180 0.199 0.900 0.495 0.275 1.800 0.042 0.215 0.190 0.884 0.734 1.200 0.259 0.222 1.160

 %StudentsProficientorBetterinReading Variable %privateschool %poor %rich %HSdiploma %white %foreign %blackandhispanic Coefficient SE ZStat

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0.130 0.296 0.440 0.289 0.537 0.540 0.011 0.172 0.060 0.509 0.239 2.140 0.447 0.188 2.380 0.080 0.635 0.130 0.137 0.193 0.710

 WorksCited Bowles,TylerJ.,andRyanBosworth."ScaleEconomiesinPublicEducation:

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EvidencefromSchoolLevelData."JournalofEducationFinance28(2002): 285300. CitiesinCrisis2009:ClosingtheGraduationGap.Rep.America?sPromiseAlliance, 2009. Hoxby,CarolineM."DoPrivateSchoolsProvideCompetitionforPublicSchools?" NBERWorkingPaperSeries4978(1994). Kealey,RobertJ.BalanceSheetforCatholicElementarySchools:1995Incomeand Expenses.Rep.NationalCatholicEducationalAssociation,1996. McEwan,PatrickJ."ThePotentialImpactofVouchers."JournalofEducation79 (2004):5780. NationalCenterforEducationStatistics.DigestofEducationStatistics.2007. OwusuEdusei,Kwame."SchoolQualityandPropertyValuesInGreenville,South Carolina."JournalofAgriculturalandAppliedEconomics(2007).