Due: Sunday by 11:59 pm at the end of Unit 2.
Vouchers to Pay Private School Tuition
Two conditions that justify government intervention in a market are the presence of external
benefits and equity concerns. Both of these issues are present in the case of primary and
secondary education in the United States. Think about what education without government
education would look like. In the absence of government intervention, all primary and secondary
education in the US would be private. Public school districts would not exist. Parents would need
to pay private firms (schools) to educate their children.
If all education were private, it’s likely that people would buy too little education, from society’s
point of view. External benefits are one reason. When a child is educated, he or she benefits and
we expect his or her parents to take those benefits into account when they purchase education.
But there are additional benefits to society which parents may ignore. As people become more
educated, they are less likely to be unemployed or be criminals and are more likely to volunteer
and vote. The presence of these external benefits is an example in support for the government
getting involved in education.
Many families in the United States have low incomes. Among all children in first through twelfth
grades in 2001, 46% were from families with incomes below $40,000. Since the cost of private
education would be an important share of these families’ incomes, most Americans would be
concerned about the fairness of relying on markets to decide how much education children
receive. Current spending by these families on private education provides some support for this
concern. Of all children in private school in 2001, only 25% were from families with incomes
below $40,000. Therefore, equity concerns are another example in support for government
getting involved in education.
Providing vs. producing education
Most economists think external benefits and equity concerns justify government intervention in
education. But it is important to distinguish between government production of education and
other forms of government intervention. At the level of elementary and secondary education, K-
12 education, government intervention today mostly means production of education by local
school districts. To benefit, children must attend public schools. But this is not the only form
intervention could take.
ECO201 – Macroeconomics
Unit 2 Assignment: Vocher Viability
There are other markets where government intervention takes the form of subsidizing people’s
access to products—think of financial aid to college students, for example. Many people in the
US think that government should move from producing education to subsidizing access.
One form that subsidy could take is government providing vouchers to parents. Parents would
use the voucher to help pay for their child’s education in a private school. After it receives the
voucher, the school would turn it in and be paid by a local or state government.
Today there is a lively debate between people who think K-12 education should be delivered
publicly and people who think quality and efficiency would be higher if government provided
vouchers and the education was delivered by private schools. Some of these quality and
efficiency arguments can be based on material we covered this week. Price competition between
private schools will pressure each one to produce efficiently. Competition for students will lead
private schools to offer programs of interest to parents and their children.
Answer the questions below and make use of the sources supplied. Be sure to cite you sources in
1. Explain whether a potential exit by students with vouchers will lead to the improvement
of public schools.
2. Discuss whether the implementation of vouchers will lead the best students to leave
public school, which could lead to a decline in education for the students left behind in
the public schools.
3. Consider what might happen to the students who use vouchers to leave public schools in
order to attend private schools. How might their academic performance change as a result
4. Finally, think about the impact of a voucher system on the students in an urban setting.
Describe whether all families would have an equal opportunity to access education.
Your final product will be a paper that:
Addresses each of the four questions above in total.
Is APA formatted.
The body is to be 2 pages minimum.
The requirements for your assignment are:
1. Answer each question fully
2. Define the overall subject of each question.
3. Cite at least three (3) resources from this week’s materials.
Students: Be sure to read the criteria and review the grading rubric on the next page, by
which your paper/project will be evaluated, before you write, and again after you write.