Essays on the Supply-Side of School Choice

Abstract

This dissertation studies the supply of charter schools, school alternatives introduced to education markets to expand choice for students. Drawing upon unique data gathered from Florida, the chapters examine the characteristics and behavior of charter schools and their implications for equilibrium sector outcomes and for policy. The first chapter investigates how non and for-profit managed charter schools differ in terms of where they locate, the composition of students they serve, and student performance. Regression estimates indicate that, among independent charters, for-profits spend less per pupil on instruction and achieve lower student proficiency gains. By contrast, among charter schools that belong to a network, for-profits spend significantly less per pupil, but expenses on student instruction are not being cut. These results thus provide empirical evidence concerning the trade-offs surrounding recent policies that restrict for-profit management of charter schools. The second chapter develops and estimates an empirical model of how charter schools decide where to locate in a school district. This is motivated by the possibility that flat funding formulas create an incentive for charter schools to spatially ``skim'' low-cost students. In the model, charter schools choose a location based on expected revenues, which depend on the per-pupil funding rate, and costs, which depend on the composition of students served. The equilibrium structure of the model, which embeds competition with public and other charter schools for students, facilitates the study of counterfactual funding policies, including a formula tying revenue to the characteristics of students a charter school serves. The estimation strategy consists of linking charter school effectiveness at raising student achievement, recovered from student test score data, with charter school expenditures to estimate the cost structure of charter schools and then leveraging revealed preference to uncover how charter schools respond to competitive and financial incentives. The results indicate that a cost-adjusted funding formula would significantly increase the share of charter schools serving disadvantaged students with little reduction in aggregate effectiveness. These findings are important in demonstrating that a mismatch between funding and costs may generate significant disparities in benefits from school choice through inequity in access. Together, the chapters suggest that supply-side incentives may provide an effective policy instrument for directing competition in education markets, which has broad implications for the design of school choice programs.