Inside the house of learning: the relative performance of public and private schools in Orissa

Abstract

Empirical evidence shows that the quality of learning in public schools is very low in India. There is also a robust belief that private schools offer better‐quality learning at a lower cost and are a cost‐effective alternative to public schools. Most of the evidence on which this latter claim is based does not correct for selection bias – students who go to private schools may differ systematically from students who go to public schools on observable and unobservable characteristics. In this context, it is entirely plausible that public schools may be no worse or even better than private schools although the latter may still be more cost‐effective. In this paper, we use a strategy suggested by Altonji, Elder, and Taber to estimate selection bias in the positive private school effect on test scores. We use test scores data on Grade Four students attending public and private schools in the eastern state of Orissa in India. Our findings suggest that there is a true private school effect as only 12–13% of the adjusted test score difference is due to selection on unobserved factors.

Keywords:

• primary education
• India
• education quality
• sorting

Acknowledgements

The findings, interpretations, and conclusions expressed in this paper are entirely those of the author and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The author is grateful to two anonymous referees for their comments on an earlier draft of this paper.

The author gratefully acknowledges the EPDF Trust Fund (Project ID: P0554559‐SPN‐TF054642) of the World Bank for providing funding support for this study.

Notes

1. The phenomenon of rapid growth in private schools is not unique to India. Andrabi, Das, and Khwaja (2002) document a similar rise in private schools catering not only for the non‐poor in Pakistan.

2. All private schools in the data are unaided and recognized by the government. There is a large number of private unaided ‘unrecognized’ schools that do not have licence from the government.

3. The puzzle that private schools can attract more educated teachers despite paying them far lower salaries is partly explained by the fact that private school teachers are typically younger than public school teachers, and younger teachers are both more well educated (due to a cohort effect) and also are typically paid less in any (private or public) system since salaries rise with experience. Private school teachers are more likely to be female than public school teachers, and there is sex discrimination in the Indian labour market (Jacob 2006).

4. The full formal model along with proofs is contained in Altonji, Elder, and Taber (2005).

5. This back‐of‐the‐envelope comparative cost–benefit analysis of public and private schools assumes that salaries constitute the major budget item for private schools akin to public schools. This is a plausible assumption, albeit data on the financial structure of private schools are not easy to collect and few actual studies therefore have been done.

Lower salaries of private school teachers probably reflect their opportunity cost in the labour market. Salaries of public school teachers are determined by a centralized bargaining process; their higher salaries reflect that process and not necessarily their true productivity. Accountability mechanisms are weak for teachers in public schools who are civil servants with tenure for life, whereas the continued employment and pay of private school teachers are subject to performance (Kingdon and Teal 2007). Lower incentives for performance in public schools may be the likely reason why teacher effort has been generally found to be only weakly related to formal qualifications in most empirical studies. Experimental evidence is now increasingly confirming the importance of incentives in improving teacher effort and children’s learning outcomes (Duflo, Dupas, and Kremer 2007; Duflo, Hanna, and Ryan 2007).