A permanent debate on economics of education regards the schools’ management and funding and how it relates to both efficiency and equity. If different schemes are responsible for differentiated school quality, it will lead to distinct learning opportunities and performances. Therefore, this creates, at the same time, a debate on the existence of stratification and its consequences on educational outcomes.
According to the OECD (2012), stratification “means creating classes of students according to their socio-economic backgrounds”. If we first relate this concept with the schools’ type of management (in almost every country, schools can be privately or publicly managed), evidence on OECD countries in figure 1 suggests that there is higher stratification in privately managed schools. The socio-economic background of students enrolled in such schools is higher than those attending publicly managed ones, with exception for Luxembourg and Chinese Taipei where the reserve happens. In countries like the Netherlands and Finland the difference is not statistically significant and so the socio-economic conditions are similar for students in both types of schools. Then, these seem to be the most equitable countries by providing access to private and public schools irrespectively of the student’s background.
Another important organizational aspect of schools is the funding source. It may be that some of the differences seen above are due to financial constraints of low-income families that prevent their children to attend privately managed schools. Therefore, some degree of State’s intervention in order to cover schooling costs could increase the proportion of students coming from a disadvantaged socio-economic background. For instance, in the Netherlands tuition costs are fully covered by the Government and schools are not allowed to ask for extra money to the parents.
In Figure 2, even though one cannot establish a causal relationship, it is clear that the level of public funding for privately managed schools is negatively correlated with socio-economic stratification. Consequently, countries where privately managed schools receive higher fractions of public funding face less stratification between public and private schools. According to the OECD (2012), “a 10 percentage-point increase in public funding for privately managed schools is associated with a 0.06 index-point reduction in stratification”.
Financial constraints can also have efficiency implications. Since privately managed schools will be highly demanded by those who can afford it while public schools will be attended mostly by children coming from a low-income family, this is likely to deliver very different learning experiences which will be reflected on the schools’ performance. This is a result not only of innate ability and school resources but also of a peer effect which is expected to yield better results in mixed contexts (that is, in classes with both low-income and high-income children).
Figure 3 shows that students in countries with less stratification tend to perform better in reading, while countries with more stratification tend to have lower results. Once again, this figure does not establish a causal relationship but adds important evidence for the debate by suggesting that it is possible to break the efficiency-equity trade-off.
I would like to conclude by stating that would be important to study the causal effects between these variables. Only then it is possible to derive policy implications. Some studies at the micro level have been conducted recently, namely through randomized experiments, but their external validity may not always be ensured, meaning that extrapolating its conclusions at a macro level is not straightforward.
Reference: OECD (2012), Public and Private Schools: How Management and Funding Relate to their Socio-economic Profile, OECD Publishing. http://dx.doi.org/10.1787/9789264175006-en