Where does voucher funding go? How large-scale subsidy programs affect private-school revenue, enrollment, and prices

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Abstract

Using a new dataset constructed from nonprofit tax-returns, this paper explores how vouchers and other large-scale programs subsidizing private school attendance have affected the fiscal outcomes of private schools and the affordability of a private education. We find that subsidy programs created a large transfer of public funding to private schools, suggesting that every dollar of funding increased revenue by a dollar or more. Turning to the incidence of subsidies and the impact of subsidies on enrollment, our findings depend on the type of program introduced: programs that restrict eligibility to certain groups of students create large enrollment gains but no change in price, while programs that offer unrestricted subsidies lead to price increases but no change in enrollment. We calculate elasticities of demand and supply for private schools, and discuss welfare effects.

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Hungerman, D. M., & Rinz, K. (2016). Where does voucher funding go? How large-scale subsidy programs affect private-school revenue, enrollment, and prices. Journal of Public Economics, 136, 62–85. https://doi.org/10.1016/j.jpubeco.2016.03.003

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