The Role and Impact of Public-Private Partnerships in Education

What Do We Know About Public-Private Partnerships in Education? 35
In general, students who receive vouchers
will choose to spend them at a better
school than their current one. In the new
school, they will interact with students
who on average perform better academically
than their previous classmates. This
interaction can improve the education outcomes
of the voucher recipients through
peer effects (Nechyba 2000), but this makes
it very difficult to disentangle the effects of
the voucher itself from the effects of interacting
with better students.
In short, there are four factors that can
improve education outcomes—flexibility
in provision, incorporating quality criteria
into the contract, optimal risk-sharing, and
competition. Table 3.2 presents the relative
strengths of these factors in the four different
types of contracts that we discuss in this
chapter.
In the case of the private management
of schools, flexibility, quality criteria, and
higher provider standards play a significant
role in ensuring success. Quality criteria
seem to be particularly important in these
kinds of contracts, which usually give a
great deal of flexibility to the private provider.
By contrast, risk-sharing plays a minimal
role in this kind of contract because the
government guarantees a certain amount of
resources and the demand for places is usually
very strong so the private provider does
not face much risk.
In the case of vouchers, the main factors
that positively influence education
outcomes are quality criteria and competition,
as explained previously. Quality control
in this case is exercised when parents
take their children out of the worst schools
and enroll them in the best ones. As long
as the parent picks a private school for his
or her child, then flexibility seems to play a
significant role in improving higher education
outcomes. Risk-sharing is not a critical
component of this kind of contract.
In the case of subsidies, the most significant
factor is the quality criteria. In general,
the government establishes certain requirements
that must be met by the private
schools that receive subsidies. Risk-sharing
and competition are of secondary importance
for this kind of contract.
Table 3.2 The effects of different types of public-private partnership contracts on education
outcomes
Factor
Private
management
of schools Vouchers Subsidies
Flexibility Significant Moderate Moderate Low
Quality criteria
Low
Significant if in
the contract
Significant if
parent and
student driven
Finally, in the case of private finance initiative
contracts, the most important factor
is the risk-sharing agreement between the
government and the provider.
Overall, some PPP programs are complex
interventions that create incentives
that modify several aspects of students’
behavior and of school operations. Identifying
the ways in which PPPs affect education
outcomes is extremely difficult because
it requires analysts to disentangle each of
these incentives. This is an area in which
more study is needed.
Empirical evidence
The main challenge in evaluating PPPs is to
overcome the problem of endogeneity, which
typically arises because of self-selection.
The challenge is to build the right control
group with which to compare the
outcomes of the beneficiaries of program.
This challenge exists in all impact evaluations,
but in education it is exacerbated by
the fact that self-selection comes from two
sources, schools and students. For instance,
in the case of subsidies, schools decide first
whether to apply for the subsidy and then
students decide which school to attend,
based partly on whether the school receives
the subsidy. Clearly, schools and students
who decide to apply for the subsidy have
different characteristics than the ones who
choose not to apply.
This section presents empirical evidence
of the impact of PPPs along two
Delivered by The World Bank e-library to:
unknown
dimensions: IP : 192.86.100.35 first, by the type of empirical
strategy Mon, 30 used Mar to 2009 tackle 12:16:23 the problem of endogeneity,
and second, by the type of contract
Moderate but
significant if in
the contract
Private finance
initiative
Risk-sharing Low Low Moderate Significant
Competition Low Significant Low Low
Source: Authors’ compilation.
(c) The International Bank for Reconstruction and Development / The World Bank