_7_ 41% increase in wages (Bau and Das, 2016). A typical teacher in our sample is female, young and unmarried, and is likely to pause employment after marriage and her subsequent move to the marital home. An important feature of this market is that the occupational choice for teachers is not between public and private schools: Becoming a teacher in the public sector requires a college degree, and an onerous and highly competitive selection process as earnings are 5-10 times as much as private school teachers and applicants far outweigh the intake. Accordingly, transitions from public to private school teaching and vice versa are extremely rare.

Despite their successes in producing higher test-scores at low costs, once a village has a private school, future quality improvements appear to be limited. We have collected data through the Learning and Educational Achievement in Pakistan Schools (LEAPS) panel for 112 villages in rural Punjab, each of which reported a private school in 2003. Over five rounds of surveys spanning 2003 to 2011, test scores remain constant in “control” villages that were not exposed to any interventions from our team. Furthermore, there is no evidence of an increase in the enrollment share of private schools or greater allocative efficiency whereby more children attend higher quality schools. This could represent a (very) stable equilibrium, but could also be consistent with the presence of systematic constraints that impede the growth potential of this sector.

This study focuses on one such constraint: access to finance. This focus on finance is driven, in part, by what school owners themselves tell us. In our survey of 800 school owners, two-thirds report that they want to borrow, but only 2% report any borrowing for school related loans.<sup>8</sup> School owners wish to make a range of investments to improve school performance as well as their revenues and profits. The most desired investments are in infrastructure, especially additional classrooms and furniture, which owners report as the primary means of increasing revenues. While also desirable, school owners find raising revenues through better test scores and therefore higher fees a somewhat riskier proposition. Investments like teacher training that may directly impact learning are thought to be risky as they may not succeed (the training may not be e↵ective or a trained teacher may leave) and even if they do, they may be harder to demonstrate and monetize.

The Pakistani educational landscape therefore presents an active and competitive educational marketplace, but one where schools may face significant constraints, including financial, that may limit their growth and innovation. This setting suggests that alleviating financial constraints may have positive impacts on educational outcomes; whether these impacts arise due to infrastructure or pedagogical improvements depends on underlying features of the market and the competitive pressure schools face.

> 8This is despite the fact that school owners are highly educated and integrated with the financial system: 65 percent have a college degree; 83 percent have at least high school education; and 73 percent have access to a bank account.