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1 Does Public School Competition Affect Teacher Quality ?

Under most conceivable scenarios of expanded choice, even with private school vouchers, the public school system will still remain the majority supplier of schooling. Therefore, it is important to know what might happen to quality and outcomes in the remaining public schools. This paper examines the effect of public school competition on academic achievement. The empirical analysis has two major components. First, estimates of average school quality differences in metropolitan areas across Texas are compared to the amount of public school competition in each. Second, the narrower impact of metropolitan area competition on teacher quality is investigated. Because teacher quality has been identified as one of the most important determinants of student outcomes, it is logical to believe that the effects of competition on hiring, retention, monitoring, and other personnel practices would be one of the most important aspects of any force toward improving public school quality. The results, while far from conclusive, suggest that competition raises teacher quality and improves the overall quality of education. * Stanford University, National Bureau of Economic Research, and University of Texas at Dallas; Amherst College and University of Texas at Dallas, respectively. This research has been supported by grants from the Smith Richardson Foundation and the Packard Humanities Institute. We would like to thank Joe Altonji, Patrick Bayer, Caroline Hoxby, and participants at the NBER Conference on the Economics of School Choice for their many helpful comments. 1 Does Public School Competition Affect Teacher Quality? By Eric A. Hanushek and Steven G. Rivkin Vouchers, charter schools, and other forms of choice have been promoted as a way to improve public schooling, but the justification for that position is largely based on theoretical ideas. Until quite recently there was little evidence on public school responsiveness to competition from private schools, other public school districts or charter schools, and empirical research remains quite thin. Under most conceivable scenarios of expanded choice, even with private school vouchers, the public school system will still remain the primary supplier of schooling. Therefore, it is important to know what might happen to quality and outcomes in the remaining public schools. This research is designed to provide insights about that from an analysis of how public schools respond to competition from other public schools. The empirical analysis has two major components. First, estimates of average school quality differences in metropolitan areas across Texas are compared to the amount of public school competition in each. At least for the largest metropolitan areas, the degree of competition is positively related to performance of the public schools. Second, the narrower impact of metropolitan area competition on teacher quality is investigated. Because teacher quality has been identified as one of the most important determinants of student outcomes, it is logical to believe that the effects of competition on hiring, retention, monitoring, and other personnel practices would be one of the most important aspects of any force toward improving public school quality. The results, while far from conclusive, suggest that competition raises teacher quality and improves the overall quality of education. Prior to the analysis of Texas public schools we briefly consider the various margins of competition for public schools. While many simply assume that expanded availability of alternatives