Do private schools increase human capital or merely skim the best students? (studies in India say the former)

By Alex Tabarrok.

"A whopping 50%+ of secondary school students in India are educated in private schools. Do private schools increase human capital or merely skim the best students? My paper, Private Education in India: A Novel Test of Cream Skimming made a simple but telling point:

…As the private share of school enrollment increases simple cream skimming becomes less plausible as the explanation for a higher rate of achievement in private schools. If the private schools cream skim when they are at 10% of public school enrollment how much cream can be left in the public school pool when the private schools account for 60% of total enrollment? Thus, if this simple form of cream skimming is the explanation for the higher achievement rate in private schools, we would expect the “private effect,” the difference between private and public scores, to be smaller in regions with a high
share of private schooling.

In fact, what I find is the private advantage, although larger in districts with smaller shares of private schooling (suggesting some skimming), stabilizes and doesn’t disappear even as the share of private schooling heads towards 100%. I also show that mean scores across all students, public and private, increase with the share of private schooling which is inconsistent with cream skimming (which predicts a constant mean). At right a picture showing that private scores continue to outpace public scores even in districts where private schools educate a majority or larger share of students.

In a new paper, Bagde, Epple and Taylor study 4 million students in thousands of villages in India during 2004-2014. In the early years of the study, none of the villages have private schools but entry starts to occur in 2007-2009 and the authors look at who switches to private schools. They find significant selection from higher income, higher caste, higher ability, and males towards private schools but no evidence that public school students are harmed.

The authors give a nod to the possibility that stratification could generate problems down the line if it increases inequality but they don’t mention the key point that, as with arguments for cream skimming, stratification concerns diminish the more students are in private schools and disappear altogether if 100% of students are in private schools.

More generally, India is pioneering private education on a grand scale and the entire world should pay attention to these innovations.

Addendum: See also my previous post on a key paper by Muralidharan and Sundararaman, Private Schooling In India: Results from a Randomized Trial."