The impact of upper-secondary voucher school attendance on student achievement. Swedish evidence using external and internal evaluations Björn Tyrefors Hinnerich Jonas Vlachos WORKING PAPER 2016:9 The Institute for Evaluation of Labour Market and Education Policy (IFAU) is a research institute under the Swedish Ministry of Employment, situated in Uppsala. IFAU’s objective is to promote, support and carry out scientific evaluations. The assignment includes: the effects of labour market and educational policies, studies of the functioning of the labour market and the labour market effects of social insurance policies. IFAU shall also disseminate its results so that they become accessible to different interested parties in Sweden and abroad. IFAU also provides funding for research projects within its areas of interest. The deadline for applications is October 1 each year. Since the researchers at IFAU are mainly economists, researchers from other disciplines are encouraged to apply for funding. IFAU is run by a Director-General. The institute has a scientific council, consisting of a chairman, the Director-General and five other members. Among other things, the scientific council proposes a decision for the allocation of research grants. A reference group including representatives for employer organizations and trade unions, as well as the ministries and authorities concerned is also connected to the institute. Postal address: P.O. Box 513, 751 20 Uppsala Visiting address: Kyrkogårdsgatan 6, Uppsala Phone: +46 18 471 70 70 Fax: +46 18 471 70 71 [email protected] www.ifau.se Papers published in the Working Paper Series should, according to the IFAU policy, have been discussed at seminars held at IFAU and at least one other academic forum, and have been read by one external and one internal referee. They need not, however, have undergone the standard scrutiny for publication in a scientific journal. The purpose of the Working Paper Series is to provide a factual basis for public policy and the public policy discussion. ISSN 1651-1166 The impact of upper-secondary voucher school attendance on student achievement. Swedish evidence using external and a internal evaluations by Björn Tyrefors Hinnerichb and Jonas Vlachosc May 4, 2016 Abstract Sweden has a school voucher system with universal coverage and full acceptance of corporate providers. Using a value added approach, we find that students at upper- secondary voucher schools on average score 0.06 standard deviations lower on externally graded standardized tests in first year core courses. The negative impact is larger among lower achieving students (but not among immigrant students), the same students who are most prone to attend voucher schools. For high achieving students, the voucher school impact is around zero. Comparing internal and external evaluations of the same standardized tests, we find that voucher schools are 0.14 standard deviations more generous than municipal schools in their internal test grading. The greater leniency in test grading is relatively uniform across different groups, but more pronounced among students at academic than vocational programs. The findings are consistent with voucher schools responding more to differences in educational preferences than municipal schools. Keywords: Voucher schools, student achievement, grading standards JEL-codes: H4, I21, I22 a We have received helpful comments from Helena Holmlund, Mikael Lindahl, Anna Sjögren and seminary participants at IFAU, Linnéus University, and SITE. Financial support from IFAU, and Jan Wallanders and Tom Hedelius Stiftelser is gratefully acknowledged. b Department of Economics, Stockholm University. E-mail: [email protected]. c Department of Economics, Stockholm University and the Research Institute of Industrial Economics (IFN). E-mail: [email protected]. IFAU - The impact of upper-secondary voucher school attendance on student achievement 1 Table of contents 1 Introduction ......................................................................................................... 3 2 The institutional setting ....................................................................................... 6 2.1 The voucher system ............................................................................................. 6 2.2 School and program choice ................................................................................. 7 2.3 Testing and grading ............................................................................................. 9 3 Empirical considerations ................................................................................... 10 4 Data ................................................................................................................... 14 4.1 Re-graded tests .................................................................................................. 14 4.2 Other data .......................................................................................................... 16 4.3 Sample decriptives ............................................................................................ 17 5 Results ............................................................................................................... 20 5.1 Main results ....................................................................................................... 20 5.2 Robustness ......................................................................................................... 24 5.3 Heterogeneity among students .......................................................................... 27 5.4 Other heterogeneity: provider, program and region .......................................... 32 5.5 Aggregate effects ............................................................................................... 36 6 Conclusions and discussion ............................................................................... 39 References ....................................................................................................................... 42 Appendix ......................................................................................................................... 48 2 IFAU - The impact of upper-secondary voucher school attendance on student achievement 1 Introduction The analysis of potential costs and benefits of the private provision of publicly funded services in general and of education in particular has a long tradition in economics. Friedman (1962) famously argued in favor of a voucher school system fully open to private providers. On theoretical grounds Shleifer (1998) labelled the case for near- monopoly government provision of elementary and secondary education indefensible, and Hoxby (2003) has argued for voucher financing of private school providers. If families are well informed and there is no discrepancy between the private and public perceptions of school quality, the case for private provision is arguably strong. If these preconditions are not fulfilled, however, a provider can potentially offer a low-quality education either by exploiting the informational disadvantage of families or by catering to private preferences despite this not being in the public interest.1 The concerns regarding informational problems and a misalignment between public and private interests are likely to be important in education. First, separating a school’s quality from the quality of its students is a non-trivial task even for skilled econometricians (Angrist et al, 2015). Second, peer concerns seem to be an important determinant of educational choice (Hastings et al., 2009; Burgess et al., 2015) despite being a questionable component of educational achievement (Angrist, 2014). Third, families seem to place widely different weights on various school characteristics, such as academic quality and school facilities (Jacob and Lefgren, 2007). There may therefore very well be demand for schools with low educational value added that instead offer families other perceived benefits.2 Since the objectives of public and private providers are likely to differ, they are also likely to respond differently to the incentives given by the demand conditions. In this paper, we provide an analysis of Swedish upper-secondary voucher schools (a.ka. free schools) using external and internal evaluations of the same standardized 1 There is a large literature discussing these issues. Despite his support for the private provision of education, several of the concerns regarding contracting difficulties raised by Shleifer (1998) apply to publicly funded education. The public and private goods aspect of education is one of several themes in Levin (2001). 2 Evidence suggesting that student composition is a more central concern to families choosing schools than school value added is provided by Rothstein (2006) and Mizala and Urquiola (2013). A large literature find positive causal effects of school outcomes on housing values, but such studies generally do not discriminate between school value added and student composition (Black and Machin, 2011). Cellini et al (2010) find that house prices respond positive to investments in school facilities despite having a small impact on test scores. Epple and Romano (2012) model voucher systems incorporating cream skimming and peer effects. Barseghyan et al. (2014) model the welfare implications of school choice taking peer preferences as given while MacLeod and Urquiola (2015) present a model of school choice where peer preferences arise