Private-sector provision of schooling: an economic assessment

In many countries the school choice agenda has promoted increased inter-school competition as a means of creating stronger incentives for state schools to raise measures of average pupil attainment. Privatization of the provision of schooling takes market-based reforms a stage further. We identify the factors that have increased governments' concern with educational outcomes and why these concerns have led to greater interest in privatization. The rationale employed for such policies elsewhere in the public sector has been based upon efficiency gains, in that existing government failures were more harmful than future market failures. More recently it has been argued that contracting or improved regulation can control the market failures associated with privately provided schooling. Given the multiple outputs generated by education providers, privatization may be particularly attractive to governments who find that the professionalism of teachers and their public service motivation generate severe agency problems. We critically review each of these propositions and question the current practice of separating issues concerned with government funding of schooling from those concerned with its provision.