The Impact of Choice and Competition on Student Results is “Underwhelming”

For the last 20 years, education policy makers in the United States, England and Australia have promoted choice and competition between schools as the way to improve school quality and student outcomes. It is argued that greater choice will bring the virtues of the free market to education.

Each country has promoted an eclectic mix of inter-district and intra-district choice programs that enable families to select among traditional public schools. Thousands of publicly funded, privately operated charter schools have opened in the US while private school voucher programs operate in several cities and states. England has embarked upon its own version of charter schools which are called ‘academies’ and ‘free schools’. Australia has provided extensive funding for families to attend private schools through a quasi-voucher program.

Yet, all this choice has had little effect on student achievement. A new review of research studies on choice and competition in education has found that these programs “have not proven to be unambiguously effective” and that their effect on student achievement is “underwhelming”.

The study was done by academics from Stanford University and is published in the latest issue of the National Tax Journal. It concludes:

Large-scale studies tend to estimate only modest benefits, if any, to participating in school choice programs and, more generally, the evidence of the effects of competition on the school system remains inconclusive. [p.158]

It surveyed prior research on the effects of charter schools on the students in these schools, the effects of voucher programs on students participating in these programs, and the effects of choice programs and competition more generally on the traditional public schools.

Charter schools
Numerous studies have been done on the impact of charter schools on student achievement.

Perhaps the most ambitious study to date is by Centre for Research on Education Outcomes (CREDO), which obtained data on over 70 per cent of students in charter schools nationwide across 15 states and Washington DC. The CREDO researchers used demographic data and prior test scores to create “virtual twins” for charter students within the traditional public schools that fed these charter schools.

After comparing these charter school students to their matched twins on math and reading growth, the study found only 17 per cent of charter schools produced results superior to what would have been expected from traditional public schools, while 37 per cent produced worse results and the rest seemed to have no effect one way or the other.

The CREDO study’s findings are consistent with other large-scale studies of charter school performance. State-level studies have found average effects ranging from slightly positive to modestly negative on charter school students’ reading and math growth. The major studies are from Texas, North Carolina, and Florida.

Another group of studies of charter school performance has yielded more encouraging results. These studies utilize the random lotteries commonly used to select which students can attend over-subscribed charter schools. By comparing the gains of lottery “winners” and “losers,” these studies can credibly estimate the effect of attendance at that particular charter school (as opposed to some defined alternative) on student outcomes. These studies have tended to focus on charter schools in large urban areas such as New York, Chicago and Boston.

Although designed to remove selection bias, one criticism of this type of study is that participating in the lottery for a place in a charter school is itself a self-sorting process that produces selection bias. Only the most motivated parents are likely to put their children in for the lottery.

In summary, the existing literature on charter schools’ impact on student achievement suggests little difference between charter and traditional public school performance.

Voucher programs
Much like the charter school literature, research studies on private school vouchers do not conclusively link the use of vouchers to improved student achievement.

The Milwaukee Parental Choice Program (MPCP), established in 1990, was the first major private school voucher program in the US. It is the largest voucher program operating in the US today. Up to $6,442 per year is available to Milwaukee residents who meet program criteria, including household income below maximum levels, and wish to attend a participating private school.

A recent evaluation of the program matched randomly selected MPCP participants to students in the Milwaukee public schools based on student addresses, prior test scores, and various demographic characteristics. It found few, if any, meaningful differences in gains in reading and mathematics achievement between students in voucher schools and public schools.

Studies of other publicly funded voucher programs have produced similarly mixed results. Evaluations of the Cleveland Scholarship and Tutoring Program, for example, suggest a wide range of academic effects depending on the samples, control groups, and methods used.

In Washington, DC, where the country’s first federally funded private school voucher program was established in 2003, a recent evaluation of the program’s first three years found evidence of reading gains but no math gains for those randomly selected to receive a voucher when measured against those not selected to receive one. Prior studies of the program showed no math or reading effects.

Choice and competition in traditional public schools
A few studies have considered the effects of choice and competition between traditional public schools on student achievement. One well-know and much cited study by Caroline Hoxby from Harvard University found that greater choice was associated with greater school productivity (student outcomes divided by per-student spending). However, a subsequent study using alternative measures found a weaker relationship and argued that Hoxby’s results were highly sensitive to the methodology used.

Other studies have examined the effects of charter school and voucher presence on the achievement of local traditional public schools. One major study found evidence that increased charter school presence in an area is associated with a decline in test scores in the area’s public, non-charter elementary schools. Other studies, however, have suggested positive effects or no measureable effects.

Several other studies have examined the relationship between the presence of voucher programs and achievement in the traditional public schools. One review of these studies found “reason for cautious optimism,” as some contain evidence of positive effects while none contain evidence of highly negative ones.

The National Tax Journal review concluded that it is very difficult to isolate the effects of choice on achievement in public schools and that the research literature is far from consistent or convincing.

Failure of the free market
All in all, this latest review of the research evidence on 20 years of choice and competition policies is hardly a ringing endorsement of the free market in education.

The review explores possible reasons why the results of choice and competition in education are inconsistent with that predicted by market theory. It suggests that the contradictory results stem from failures to satisfy the assumptions underlying the theory. That is, the assumptions of free market theory are not present in the real world.

One core assumption of market theory is that all participants in the marketplace have full information. This is a demanding assumption that never applies in the real world and certainly does not apply in education which is characterised by much uncertainty. Indeed, much of the information generated by market-based approaches about school performance is inaccurate and misleading.

There is also strong evidence that people base their choices of schools on the socio-economic and racial composition of schools rather than their academic performance. For example, research cited by the review study shows that people making choices about schools tend to gravitate toward schools with fewer Black students as they continued their searches, despite finding no significant change in the academic performance of the schools that they viewed over time.

Another core assumption for markets to work is that there are no barriers to either buyers or sellers participating in the market. This too is unrealised in many markets and, in particular, in education. Barriers to access to schools are a feature of education. For example, many schools restrict admissions by denying entry to low achieving students and students with disabilities. The lack of transport is also a barrier to accessing schools further away from home.

The review further explored these failures in the market for education through a survey of principals in Milwaukee public schools about their perceptions of school choice and competition between schools. The survey results indicate that school leaders feel competition from other schools, but they respond to this competition by trying to influence the information available to families instead of trying to adjust their offerings to better serve student needs. They respond to perceived competition by improving their marketing efforts rather than their educational programs.

All this indicates that market failures are endemic in education. The assumptions of the free market simply don’t exist. It is little wonder then that choice and competition in education has been such an abysmal failure.

Susanna Loeb, Jon Valant & Matt Kasman, Increasing Choice in the Market for Schools: Recent Reforms and Their Effects on Student Achievement, National Tax Journal, 64 (1): 141-164, March 2011.

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