Horizontal Differentiation and the Policy Effect of Charter Schools

December 2019

While school choice may enhance competition, incentives for public schools to raise productivity may be muted if public education is viewed as imperfectly substitutable with alternatives. This paper estimates the aggregate effect of charter school expansion on education quality while accounting for the horizontal differentiation of charter school programs. To do so, we combine student-level administrative data with novel information about the educational programs of charter schools that opened in North Carolina following the removal of the statewide cap in 2011. The dataset contains students' standardized test scores as well as geocoded residential addresses, which allow us to compare the test score changes of students who lived near the new charters prior to the policy change with those for students who lived farther away. We apply this research design to estimate separate treatment effects for exposure to charter schools that are and are not differentiated horizontally from public school instruction. The results indicate learning gains for treated students that are driven entirely by non-horizontally differentiated charter schools: we find that non-horizontally differentiated charter school expansion causes a 0.05 SD increase in math scores. These learning gains are driven by public schools responding to increased competition.

Keywords

charter schools, school choice, competitive effects, horizontal differentiation, strategic differentiation

Education level

K-12 Education

Topics

School Choice