Public vs. Private Schools: The Impact on Wage Rates

ABSTRACT Educational reform has attracted a lot of attention both in political and academic circles in recent years, and it continues to do so. Newly elected office holders at the federal as well as the state level (e.g., U.S. President George W. Bush and New Jersey Governor James E. McGreevey) made education one of the centerpieces of their respective campaigns. One of the hotly debated topics is the issue of school vouchers which would permit parents to take their children out of the public school system and send them to a private school instead. They would receive a voucher in the amount that the public system would not have to spend for educating one fewer student. So far, the experience with voucher programs is limited, but in mid-February 2002, the U.S. Supreme Court indicated that at least some of the judges held the opinion that such vouchers could be used for schools with religious affiliation without violating the separation of church and state. This suggests a possible expansion of school voucher programs in the future. Before such larger-scale voucher programs are enacted, however, it would seem desirable to gain knowledge about the relative benefits of private versus public schools. Dating back to the work of James Coleman and his colleagues (Coleman, Hoffer, and Kilgore, 1982; Coleman and Hoffer, 1987), researchers have attempted to analyze and quantify such benefits. This paper contributes to the relevant literature in the following ways: First, unlike much of the literature (e.g., Coleman, Hoffer, and Kilgore, 1982; Coleman and Hoffer, 1987; Evans and Schwab, 1995) which uses data from the "High School and Beyond Study" as primary data source, I use the National Longitudinal Survey of Youth (NLSY79). As described in more detail in Section 2, the NLSY79 is a panel data set which is rich in information both at the individuals' level as well as at the level of the educational institution the respondents attended. INTRODUCTION Educational reform has attracted a lot of attention both in political and academic circles in recent years, and it continues to do so. Newly elected office holders at the federal as well as the state level (e.g., U.S. President George W. Bush and New Jersey Governor James E. McGreevey) made education one of the centerpieces of their respective campaigns. One of the hotly debated topics is the issue of school vouchers which would permit parents to take their children out of the public school system and send them to a private school instead. They would receive a voucher in the amount that the public system would not have to spend for educating one fewer student. So far, the experience with voucher programs is limited, but in mid-February 2002, the U.S. Supreme Court indicated that at least some of the judges held the opinion that such vouchers could be used for schools with religious affiliation without violating the separation of church and state. This suggests a possible expansion of school voucher programs in the future. Before such larger-scale voucher programs are enacted, however, it would seem desirable to gain knowledge about the relative benefits of private versus public schools. Dating back to the work of James Coleman and his colleagues (Coleman, Hoffer, and Kilgore, 1982; Coleman and Hoffer, 1987), researchers have attempted to analyze and quantify such benefits. This paper contributes to the relevant literature in the following ways: First, unlike much of the literature (e.g., Coleman, Hoffer, and Kilgore, 1982; Coleman and Hoffer, 1987; Evans and Schwab, 1995) which uses data from the "High School and Beyond Study" as primary data source, I use the National Longitudinal Survey of Youth (NLS Y79). As described in more detail in Section 2, the NLS Y79 is a panel data set which is rich in information both at the individuals' level as well as at the level of the educational institution the respondents attended. A second difference between the existing literature and this paper is the exact research question: While much of the previous work focuses on educational outcomes such as high school graduation (e. …