A large body of literature in economics, education, and sociology shows that students attending private schools outperform students attending traditional public schools in a wide range of outcomes. Since a common feature of private schools is their autonomy from school district offices, these findings strengthen initiatives to improve outcomes of public school students through the establishment of charter public schools in the United States, free schools in the United Kingdom, independent public schools in Australia, and community-managed schools in many developing countries. It is often unclear, however, whether private and independent public schools causally improve student outcomes and, even if they do, which characteristics drive such improvements.
Studies attempting to identify the effects of private or charter schooling and to disentangle the various causal mechanisms face several challenges. First, it is difficult to identify the causal effects of independent public or private schooling on students’ outcomes on the basis of most observational data available because unobserved selection bias is pervasive and challenging to address (Altonji et al. 2005a). Although recent natural experimental evidence based on the random assignment of private school vouchers or oversubscribed charter school slots to low-income applicants shows significant positive effects of these schools on student outcomes, it is still difficult to learn precisely which aspects of these schools explain the differences in outcomes. When these studies compare the outcomes between the randomly selected receivers (treatment group) and non-receivers (control group) of private school vouchers or charter school slots, the estimated effects of private or charter schooling capture the overall differences in peer quality and other dimensions of school and teacher quality between the highly sought-after schools and the default traditional public schools. In some cases, the newly introduced randomization programs would also put competitive pressures on existing public schools in which the control groups enroll, and hence would change the outcome trajectories of the control groups and bias the estimates. As applicants may differ from the general student population, it is also unclear whether the effects will be similar if these programs are scaled up.
The objectives of this study are two-fold. First, using a unique randomized natural experiment in Seoul, South Korea (hereafter Korea), we show that private high schools are more effective than public high schools in generating positive educational outcomes. Since the 1970s and until recently, the Korean government had implemented the so-called ‘equalization policy’ in several major metropolitan areas, where students were randomly assigned to different high schools within school districts of their residence. The random assignment in Seoul indicates that, although motivated parents may choose to live in a neighborhood with...