Category Archives: Journal Article

The Long-Run Effects of Privatization on Productivity: Evidence from Canada

Source: Anthony E. Boardmana, Aidan R. Viningb, David L. Weimerc, Journal of Policy Modeling, May 10, 2016


From a public policy perspective, the social value of privatization depends on the aggregate efficiency benefits over the long term. However, most privatization studies that examine the efficiency impacts of privatization employ relatively short time frames: usually 3-years before and 3-years after the privatization. In contrast, this study examines the long run effects (up to 24 years) of privatization on productivity based on an examination of major, mostly federal, share-issue privatizations in Canada. We control for factors that might affect productivity apart from privatization by including panels of Always-SOE firms and Always-Private firms, and estimating difference-in-difference models. The major finding is that the productivity of privatized SOEs increases relative to SOEs at a decreasing rate, peaking at 14-16 years. Despite this improvement, the productivity of privatized firms continues to lag that of Always-Private firms. We consider some of the policy implications of these findings.

Charting School Discipline

Source: Susan DeJarnatt, Kerrin C. Wolf, Mary Kate Kalinich, Temple University Legal Studies Research Paper No. 2016-17, March 30, 2016

Exclusionary school discipline can steer students away from educational opportunities and towards the juvenile and criminal justice systems. As many public school systems have turned to exclusionary school discipline practices over the past two decades, they have also increasingly adopted charter schools as alternatives to traditional public schools. This research is examines the student codes of conduct for the charter schools in the School District of Philadelphia to consider the role of their disciplinary practices and the potential effects on charter students. We analyzed every disciplinary code provided to the Philadelphia School District by charter schools within Philadelphia during the 2014-2015 school year. Our goal was to examine the provisions relating to detention, suspension, and expulsion, along with other disciplinary responses, to determine what conduct can result in disciplinary consequences, what responses are available for various types of misbehavior, and whether the code language is clear or ambiguous or even accessible to students or potential students and their parents or caregivers. We conclude that too many of the codes are not well drafted, and too many follow models of punitive discipline that can be used to push out non-compliant or challenging students. Some codes grant almost complete discretion to school administrators to impose punitive discipline for any behavior the administrator deems problematic. We hope that this work will spur future research on implementation of charter school discipline policies to illustrate how charter schools are using their codes. Further, we hope to see the charter sector develop model disciplinary codes that move away from a zero tolerance punitive model towards disciplinary systems based on restorative principles.

Internalizing Private Prison Externalities: Let’s Start with the GED

Source: David M. Siegel, Notre Dame Journal of Law, Ethics and Public Policy, Vol. 30, No. 1, 2016


Prison education is a remarkably good investment for society, yet an increasing proportion of inmates have no access to it because the operators of the prisons in which they are held have a powerful incentive not to provide it: they make more money that way. Critics and analysts of private prison operators have suggested various incentive structures to improve their performance, but most jurisdictions focus on the operator’s cost to the contracting entity. The social costs imposed by foregoing prison education are not part of the arrangement between a private prison operator and a jurisdiction with which it contracts. Although these costs are real and substantial to the inmates who bear them, because the inmates are not parties to the contract, these costs are externalities. Imposing these social costs on prison operators could improve the conditions for inmates in their custody and is very likely to improve these inmates’ success after release. Unlike more complex strategies for imposing incentives on correctional programs to reduce recidivism, prison education is a known, straightforward rehabilitative strategy whose provision can be measured quite easily at the point of release. There is even a well-accepted metric for prison education administered by an independent third party: the General Educational Development Test (GED). This article proposes using the GED to internalize the cost of reduced or poor inmate education by imposing financial penalties on private prison operators whose inmates do not obtain, or make progress toward, a GED during their incarceration. This would provide the social benefits of inmate education, alter private prison operators’ behavior at minimal administrative cost, and most importantly, benefit inmates being released.

‘Fragmented’ School Districts: A Complicated and Controversial Issue

Source: Mark Maciag, Governing, April 2016

Numbers such as these have long drawn the ire of policymakers, and in an era of budget cutbacks, “fragmented” school districts serve as prime targets for consolidation. At the beginning of this year, lawmakers in Indiana, Kansas, Mississippi, Pennsylvania and Oklahoma all introduced legislation aimed at merging school districts or combining their administrative duties. But such proposals frequently are met with fierce opposition from parents and teachers. School districts with very small enrollments are actually quite common across the country. A Governing analysis of federal data from the 2013-2014 school year found that a third of all local districts were made up of only one or two public schools. Nearly half of all districts nationally — 46 percent — serve fewer than 1,000 students. While many of these districts are in rural or outlying areas, 2,050 are in metro areas. … But is such a system really more efficient? Elementary and secondary education accounted for 15 percent of Hawaii’s total state expenditures in fiscal 2014, compared with 20 percent for all states, according to a report by the National Association of State Budget Officers. Still, it’s difficult to gauge how much savings any particular consolidation would yield, given how differently districts are structured throughout the country. Oklahoma and other select states have already passed laws that cap local districts’ administrative costs. …


How Does School District Consolidation Affect Property Values? A Case Study of New York
Source: William D. Duncombe, John Yinger, Pengju Zhang, Public Finance Review, Vol. 44 no. 1, January 2016
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From the abstract:
This article explores the impact of school district consolidation on house values based on house sales in upstate New York State from 2000 to 2012. By combining propensity score matching (PSM) and double-sales data to compare house value changes in consolidating and comparable school districts, we find that, except in one relatively large district, consolidation has a negative impact on house values during the years right after it occurs and that this effect then fades away and is eventually reversed. This pattern suggests that it takes time either for the advantages of consolidation to be apparent or for the people who prefer consolidated districts to move in. Finally, as in previous studies, the long-run impacts of consolidation on house values are positive in census tracts that initially have low incomes, but negative in high-income census tracts, where parents may have a relatively large willingness to retain the nonbudgetary advantages of small districts.

Putting Dollars Before Scholars? Evidence from For-Profit Charter Schools in Florida

Source: John D. Singleton, Economic Research Initiatives at Duke (ERID) Working Paper No. 212, March 3, 2016

This paper compares for and non-profit operation of charter schools in Florida, where the for-profit share has grown by 80% since 2004-5 to nearly half of all charter schools. The unique dataset assembled combines the annual independent financial audits and accountability reports filed by all Florida charter schools with enrollment data and student proficiency on end-of-grade exams. Comparisons reveal that independent for and non-profit charter schools locate in similar markets and serve similar student bodies, whereas for-profits belonging to a network locate in lower income, denser, and more Hispanic areas relative to network non-profits. Bearing out the concerns of parents and policymakers, regression estimates indicate that, among independent charters, for-profits spend 6% less per pupil on instruction and achieve lower student proficiency gains. By contrast, among charter schools belonging to a network, for-profits spend over 10% less per pupil (around $800), but expenses on student instruction are not being cut. The estimates, which control for differences across schools in student composition and other characteristics, imply that an equivalent level of per pupil expenses purchases 0.029σ higher student proficiency in reading and 0.028σ higher in math at network for-profit charter schools. These findings suggest that network for-profit operated charter schools are able to economize without compromising student education.

Efficient Local Government Service Provision: The Role of Privatization and Public Sector Unions

Source: Rhiannon Jerch, Matthew E. Kahn, & Shanjun Li, USC-INET Research Paper No. 16-10, March 8, 2016

Local governments spend roughly $1.6 trillion per year to provide a variety of public services ranging from police and fire protection to public schools and public transit. However, we know little about public sector’s productivity in delivering key services. To understand the productivity both over time and across space, we examine public bus service, which represents a standardized output for benchmarking the cost of local government service provision. There is a significant dispersion across transit agencies in the operating cost per bus mile with the highest being more than three times as high as the lowest among top 20 largest cities by population. We estimate the cost savings from privatization and explore the political economy of why privatization rates are lower in high cost unionized areas. Our analysis finds that the full privatization could result in cost savings of $5.7 billion in 2011 (30% of total operating expenses of bus services), and a welfare gain of at least half a billion dollars.

Charter High Schools’ Effects on Long-Term Attainment and Earnings

Source: Tim R. Sass, Ron W. Zimmer, Brian P. Gill and T. Kevin Booker, Journal of Policy Analysis and Management, April 4, 2016

Since their inception in 1992, the number of charter schools has grown to more than 6,800 nationally, serving nearly three million students. Various studies have examined charter schools’ impacts on test scores, and a few have begun to examine longer-term outcomes including graduation and college attendance. This paper is the first to estimate charter schools’ effects on earnings in adulthood, alongside effects on educational attainment. Using data from Florida, we first confirm previous research (Booker et al., 2011) that students attending charter high schools are more likely to graduate from high school and enroll in college. We then examine two longer-term outcomes not previously studied in research on charter schools—college persistence and earnings. We find that students attending charter high schools are more likely to persist in college, and that in their mid-20s they experience higher earnings.

The Performance of Performance-Based Contracting in Human Services: A Quasi-Experiment

Source: Jiahuan Lu, Journal of Public Administration Research and Theory, Vol. 26 no 2, 2016

Performance-based contracting (PBC) is becoming increasingly attractive to public human service agencies. By linking contract compensation to contractors’ performance, PBC is expected to foster quality services, to improve outcomes, and to reduce government monitoring. However, empirical evidence on the effectiveness of PBC remains both limited and mixed. Based on a case study of the Indiana vocational rehabilitation program, this article employs a quasi-experimental design to evaluate the effectiveness of PBC for individual employment outcomes over the 2004–09 period, with the Michigan vocational rehabilitation program as a control. Using propensity score matching and difference-in-differences regressions to control for the imbalances between the two states, this article finds that PBC significantly improves employment results and reduces time to employment, two measured performance indicators. However, the impact of PBC on unmeasured employment quality, as indicated by working hours and wages, is trivial. This article further suggests relational contracting as a supplemental mechanism for PBC in human service provision.

Macroeconomic Dimensions of Public-Private Partnerships

Source: Sabrina I. Pacifici, International Monetary Fund Working Paper, March 24, 2016

The voluminous literature comparing public-private partnerships (P3s) and own-investment (OI) by the public sector is dominated by contributions from microeconomic theory. This paper gives macroeconomics a voice in the debate by investigating the repercussions of P3 vs. OI in a dynamic general equilibrium model featuring private capital accumulation and involuntary unemployment with efficiency wages. Typically P3s cost more but produce higher-quality infrastructure and boast a better on-time completion record than OI; consequently, they are comparatively more effective in reducing underinvestment in private capital, underinvestment in infrastructure, unemployment and poverty. The asymmetric impact on macro externalities raises the social return in the P3 2 – 9 percentage points relative to the social return to OI, depending on whether the externalities operate singly or in combination and on whether P3 enjoys an advantage in speed of construction.”

How Do Nonprofit Firms Respond to Tax Policy?

Source: Brian Galle, Public Finance Review, March 22, 2016

We investigate the effects of variations in the value of the charitable contribution deduction on nonprofit firm behavior, including exploring for the first time the effects of the tax price of giving on fund-raising. We find that a 1 percent increase in tax subsidies is correlated with a 2.0 percent increase in fund-raising, while the elasticity of real charitable output to changes in tax price is less than one in absolute value for most firms. We derive a new equation for treasury efficiency in the presence of fund-raising and find that while our point estimates still support treasury efficiency, our confidence intervals are wide enough to allow some possibility that the deduction is not cost effective. Further, the modest elasticity of charitable output to tax price implies that tax subsidies can crowd out other revenue sources, such that the efficacy of the subsidy depends on the relative efficiency of these alternative sources.