A few years ago, Jerry Hausman showed that Wal-Mart does a lot to benefit even consumers who don't shop there. When a Wal-Mart opens, competitor local supermarkets cut their prices to keep customers. And poor customers reap most of the benefits.
Figlio and Hart, in the latest AEJ: Applied Economics, show a similar effect with school vouchers. An ungated version is here.
Suppose your worry about school vouchers is that low social capital parents' stick with a local underperforming school while kids whose parents have better social capital all flee with their vouchers to the better private schools. And suppose further that you care way more about the potential losses to the former than about the gains for the latter. You might then oppose voucher systems.
Figlio and Hart show that public schools facing competitive pressure from private schools under a new voucher system provided stronger student score improvements. All that concern about kids left behind as the private schools cream off the best voucher kids? Not much of an issue if the public schools facing the competitive pressures perform better as consequence. They find the biggest positive effects in public schools facing strong financial incentives to retain low-income students.
Their identification strategy's pretty decent, exploiting the timing of the voucher roll-outs across the state. But do go have a look to see if they've accounted for your particular objections. And then update your priors.
Heard a related story yesterday talking to a rural friend who had purchased a Chinese pickup truck. The truck was a dud and broke down several times before my friend replaced it with a traditional brand of truck. But, my friend insisted, this was still a good thing to do since the arrival of the Chinese truck firm has driven down the price of the traditional brands so much that it was still cheaper for him to have bought the Chines truck a year ago and the new one a month ago, than it would have been to have bought the traditional truck a year ago.
ReplyDeleteI think the authors mock us when they say "The effect sizes are precisely estimated but modest, with a one-standard deviation increase in competition raising test scores by less than one-twentieth of a standard deviation." That sort of increase in scores (in an educational setting at least), is not 'modest' its imperceptible. I rather wish that some one would come up with a good analysis of why educational institutions are so resistant to competitive pressures?
ReplyDeleteI suspect that he's confusing chinese truck competition effects with higher dollar effects.
ReplyDeleteThe effect is small, yes. But the usual argument is that those left behind are left worse off. This shows a small but opposite effect - that's important.
ReplyDeleteYou might be right though I wonder as the impact of the dollar would take $10,000 off the price of a $40,000 vehicle. It didn't for cars anyway. On another note - how did your inter-actions with "Southern Response" end up
ReplyDeleteTheir guy went through and tallied up the damaged things; we're waiting to hear from them on what they think it would cost to fix the damaged things and for a visit from their swimming pool engineer guy.
ReplyDeletehere is to you Eric, and all the best to your family in 2014.
ReplyDeleteCanadians generally i am not so sure about ,but your residency Visa is granted permanent. You are allowed to say what you like, and on any subject you like,
Missed this excellent blog. Wonderful analogy.
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