More perniciously, there is a pervasive danger that once public subsidies are brought into the purely private system, the political economy of countries with poor schooling capacity will generate worse outcomes. In India for instance, there is a long-standing tradition of “grant-in-aid” schools that function with public subsidies, usually on land leases. Performance data tend to show little difference between the functioning of these schools and pure public schools; it’s the private sector that receives zero public subsidies where performance is higher on tested subjects.

How to alleviate constraints among households in practical manner is an exciting ongoing area of research. In the case of vouchers, for instance, critical design elements need to be worked out and political economy constraints need to be seriously examined. But other options—ranging from information to family support—are all possibilities that can and are being looked at in various countries.

# **Section V: Conclusion**

The rise of private schooling is always intertwined with fundamental debates over the rights of children and the need to adjudicate between the state and parents regarding the welfare of the child. These are debates that have been going on for at least 2500 years, and it is difficult to believe that this time will be different. Although there has been significant progress in recent years addressing vexing questions of causality, the program of comparing public and private schools on a limited set of outcomes and of understanding the production function of schooling will ultimately have to face the deeper questions of what parents want from schooling and what society as a whole wants the education system to provide.

We argue instead for a pragmatic approach.

We apply the pragmatic approach in a specific way. Using an established arsenal of theoretical and empirical tools from economics—and particularly, the field of firms and industrial organization—we show that progress can be made by first alleviating the constraints that prevent schools and parents from achieving their _own_ stated objectives. Using empirical examples, we show how this can be practically incorporated into policy and how doing so improves educational outcomes for children in Pakistani schools. We further argue that after alleviating such constraints, we can reexamine the new equilibrium to see what was achieved. When we do so, we find considerable improvements along the very dimensions that societal consensus advances as the areas that need improvement—higher enrollment, better test-scores and lower prices for consumers.

We do not claim that this is the _only_ approach possible; neither do we wish to be accused of a certain naiveté in our starting assumption that households care optimally for the welfare of their children and will achieve the best possible outcomes, given the chance to do so. Neither do we claim that schools will also care about peers, richer (Spanish) parents may send their children to concertados and the additional fees may be used to ensure that poorer (immigrant) parents cannot (Jacott and Rico 2006). Prices act as an entry barrier for low-income households, much like in theories of “club goods”. Again, schools cater to parental desires, but quality in this case is “my child being with other children like him/herself”. Bold and others (2011) point to a similar dynamic in Kenya, where abolishing user fees did not increase public school enrollment due to a large exodus of existing richer students to the private sector. Bau’s (2014) work from Pakistan sketches a theoretical model and structurally estimates the adverse impacts of greater information when wealthier students benefit more from a strong match to a school. She shows that an additional private school in the market increases within-school inequality in yearly test score gains by 0.1 standard deviations.

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