4. Disaggregated test score data available for India, Pakistan, and Nepal show that on average, privately managed schools perform at least as well as government managed schools in terms of student test scores, at significantly lower costs to society. At the same time, it is important to acknowledge the average poor performance in private schools. Moreover, there is significant variability in student achievement among schools of both types, with a large overlap between test score distributions of two types of schools, indicating the existence of many bad private schools as well as good government schools. We point out several advantageous characteristics of private schools; in particular, we find substantial, albeit indirect, support for teacher behavior and accountability as a driver of private schools’ effectiveness. Nevertheless, these advantages would not suffice to induce student achievement over the long run, if, for example, there is little improvement in the professional knowledge and skills of available teachers, particularly in economically disadvantaged areas. It is also important to realize that in an education market, the quality of government schools serves as the benchmark against which private schools differentiate themselves. The lower the quality of government schools, the lower the quality of private schools, unless the market is competitive among private schools, which is unlikely in many rural areas. Higher wages of government teachers do not seem associated with higher student achievement outcomes; hence a focus on student achievement in policy dialogue and policymaking, coupled with strengthened governance and accountability systems, would be important. This requires a system of reliable and regular measurement of student achievement to begin with. On the other hand, many private schools may imitate elite ones in visible aspects of infrastructure, facilities, methodologies, and curriculum.

5. Many unaided private schools, whose students perform, on average, at least as well as government school students, are unregistered and free of government regulations. This casts doubt on the effectiveness of regulations on school registration, fees and teacher credentials that the government may set for private schools, especially given the weak institutional capacity. On the other hand, there is potential for contractual partnerships between the government and private sector to leverage both “equity” and “efficiency,” and the design of an accountability mechanism for such partnerships would be crucial. Moreover, regional and international evidence suggests that understanding and customizing teaching to the child’s individual level and way of learning is important to improving academic achievement – there is potential to cater to this need through a student-focused approach in classroom teaching and classroom and school management, or through well-designed outside-classroom tutoring services, among other potential reforms.

6. In the remainder of the paper, we first discuss the types and general extent of private sector engagement in education in South Asia. We then discuss in more detail the prevalence, socio-economic patterns, and over-time evolution of private schooling in aided and unaided schools, as well as of outside-classroom tutoring, in countries for which data and information allow such analyses. We next present evidence on student achievement associated with the different types of private sector engagement, discussing underlying factors and mechanisms, with references to the socio-economic patterns identified in the previous section. The last section draws conclusions and policy implications.

# **II. Types, extent, socio-economic patterns, and over-time evolution of private sector engagement**

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