Secondary school fee inflation: an analysis of private high schools in Victoria, Australia

ABSTRACT

The recent growth in privately administered secondary education in many developed countries has been a widely observed phenomenon. The Australian private secondary school sector has grown faster than those in any other OECD nation, even though the average tuition fees charged by these schools have increased at double the nation’s overall rate of inflation. In this paper, we employ a panel data set to estimate a set of hedonic price indices for private secondary schools that cater to different segments of the population in order to determine if and how changes in their characteristics influence the changes in fees.

KEYWORDS:

• Private schools
• price indices
• universal voucher system
• school affordability

JEL CLASSIFICATION:

• I21
• I22
• E31
• C33

Acknowledgements

The authors wish to thank the editor-in-chief and the referees for their comments and helpful suggestions that have improved this article.

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Jenny Lye http://orcid.org/0000-0002-5938-9095

Joe Hirschberg http://orcid.org/0000-0001-8354-5433

Notes

1. Most of all private schools in Victoria offer the VCE, although there are some that offer the International Baccalaureate as well.

2. The Department of Education website is https://education.gov.au/; the website for the Senate Education, Employment and Workplace Relations Committee in Estimates hearings is www.aph.gov.au and the My School website is www.myschool.edu.au. The detailed State funding is only available for individual schools from 2009 to 2013.

3. The cases of interpolation are confined to no more than gaps of one year and make up less than 1% of the observations.

4. The SES measure used is based on scores used to distribute Australian Government recurrent grants to private schools. Student residential addresses are linked to ABS national census data to obtain a socio-economic profile of the school community. See Harrington (2011) for details as to the use of the SES for government funding allocations.

5. These figures are taken from the Australian Curriculum, Assessment and Reporting Authority (2013).

6. These means include the results for two selective government schools that stand out as outliers in the performance measures. Entry to these schools is subject to examinations while Independent schools do not require examinations for entry, although some offer scholarships based on examinations which might induce the entry of more talented students.

7. This series is entitled Index Numbers; Secondary Education; Melbourne (id A2331481L), Table 11. CPI: group, subgroup and expenditure class, index numbers by capital city, from ABS (2016). The methodology for the computation of these tables can be found in ABS (2011).

8. The test of differences in the is equivalent to testing if and are .

9. This table is based on 422 SA2 statistical areas as defined in the 2011 Census located in Victoria with 100 or more persons in both the 2001 and 2011 censuses. The median population of the SA2s in Victoria is approximately 10,000. The income quantiles are based on the average reported family incomes with at least one child under the assumption of a lognormal distribution of income for each SA2 area.

10. Unlike the US colleges that provide financial aid on an inverse scale to family income, the majority of the private schools in this study do not publically acknowledge the degree to which they may offer discounts.

11. The Victorian Gross State Product Annual $m data from ABS Document #5220.0 Australian National Accounts: State Accounts 2013–14.

12. In addition, we have verified our results using an alternative computer package. The results reported were generated using the xtreg program with school-fixed effects and clustered standard errors by school in Stata 14.2. The base models were also estimated using EViews 9.5 with no substantial differences.

13. The estimation of this model was done using the xtpoisson program with school-fixed effects and robust standard errors in Stata 14.2.

14. The 2013 returns of the destination survey from the Victoria Education and Training (2014).