The Termination of Publicly Funded Private School Contracts: Supply and Demand Side Effects

ABSTRACT

We evaluate the demand and supply side effects of a policy which cuts funding to a significant portion of publicly funded private classes in Portugal, Contratos de Associação (AC), in which students do not pay tuition fees and are under the same admission criteria as in Public Schools – i.e., these private schools cannot select students based on their socioeconomic status or prior achievement. This policy established that from 2016/17, Private school classes would no longer receive Contratos de Associação funding if the government deemed that there were enough nearby Public Schools with capacity to absorb the new student cohorts. Compared to the pre-reform student cohort, we find that affected students changed the demand patterns for different types of schools: both the number of Public school classes and regular Full-Fee Private School classes increased, but the rise in the former was larger in absolute terms. Nevertheless, this pattern of movements was heterogenous across different sub-groups of the student population. While non-low-income students switched both to Public and Private school classes, we verify practically a one-to-one movement of the low-income student cohort from AC schools to Public schools only. On the supply-side, we find that the decrease in AC schools was not fully compensated by the increase of schools that are now under different Private School systems and that some of these schools later shut down.

KEYWORDS:

• School choice
• school contracts
• publicly funded private schools

Acknowledgments

The authors thank Rodrigo Queiroz e Melo and AEEP for providing information about Contratos de Associação. We also thank DGEEC for providing the anonymized administrative education databases used in this research. We also thank Fundação para a Ciência e a Tecnologia (FCT) for supporting this work (UIDB/00124/2020, UIDP/00124/2020, PTDC/EGE-ECO/4764/2021, and Social Sciences DataLab - PINFRA/22209/2016), POR Lisboa and POR Norte (Social Sciences DataLab, PINFRA/22209/2016). João Firmino and Afonso Câmara Leme gratefully acknowledge the support from FCT grants SFRH/BD/122573/2016 and SFRH/BD/118966/2016, respectively.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. See Jabbar et al. (2022); Gao and Semykina (2021); Musset (2012); Epple et al. (2017a); Epple, Romano, and Zimmer (2016); and Rouse and Barrow (2009) for reviews on these topics.

2. Portuguese Law nr.85/2009 of 27th August (Article nr.1 and nr.2)

3. The Mathematics exam at the end of the 12^th grade was required for students in the following two Academic tracks: Sciences & Technology and Socioeconomic Sciences; it was not required for students in the other two Academic tracks: Languages & Humanities and Visual Arts.

4. Portuguese Decree-Law nr.553/80 of 21st November (Article nr.14–16)

5. Portuguese Law nr.45/86 of 14th October (Article nr.6)

6. https://www.dn.pt/portugal/milhares-protestam-em-lisboa-contra-alteracao-aos-contratos-de-associacao-5198769.html

7. Dispatch nr. 256-A/ME/96

8. Portaria nr. 1324-A/2010 (n° 1 of Article n° 9)

9. Portaria 277/2011

10. Associação de Estabelecimentos de Ensino Particular e Cooperativo (AEEP) represents private and cooperative (publicly funded private contracts) establishments, which are not tertiary education and is responsible for creating cooperation systems between schools and providing various types of support (legal, technical, etc.)

11. Portaria nr. 172-A/2015 and Portaria nr. 165/2017

12. We thank Directorate General of Education and Science Statistics (Direcção-Geral de Estatísticas da Educação e Ciência – DGEEC) for providing the administrative dataset used in this research.

13. We consider municipalities that in the period of analysis (i.e., from 2008/09 to 2017/18) ever had simultaneously at least one 5^th grade AC class, at least one 7^th grade AC class, and one 10^th grade AC class – the starting grades of each cycle, in which AC classrooms are formed, and financing is decided.

14. As Figure 3 intends to show how the cut in funding affected the number of AC classes in different grades and is not aimed at capturing student movements to different types of schools, its sample includes all 278 Portuguese municipalities – i.e., it is not restricted to the sample of 28 municipalities that ever had AC classes.

15. For the sake of simplicity, we chose to show results for the 5th grade only. Results for other school cycle grades (7th and 10th) are comparable. Moreover, looking at these 28 municipalities of interest, around 40%–45% of public school students, 30%–35% of AC students, and virtually 0% of full-fee students benefit from SASE – grades 5 to 9; whereas for grades 10 to 12 low-income students made up to 25%–30% of public and AC schools, and again 0% of full-fee students.

16. Since we intend to cover the full (100%) representation of low-income students across different school types, for this analysis we also consider schools that contain a mix of private full-fee classes and of AC classes.

17. Not shown here but results available upon request.

18. https://observador.pt/2021/05/17/cortes-nos-contratos-de-associacao-levaram-ao-encerramento-de-20-colegios-privados/; https://www.publico.pt/2021/05/17/sociedade/noticia/estado-paga-menos-92-milhoes-ano-20-colegios-encerraram-1962788

19. The figures supporting this further analysis follow the spirit of Figures 5 and 6 and are available upon request.