Smaller Schools or Longer Bus Rides? Returns to Scale and School Choice
School choice programs, such as vouchers or charter schools, offer parents an alternative to traditional public schools, while removing students from traditional public schools. If there are returns to scale in education, a major exodus of students from public schools could increase the average cost of students left behind. This paper uses a structural model to estimate the magnitudes of the scale economies, and then uses these estimates to simulate the increase in average cost in the public schools from a choice program. Depending on the assumptions made, the long run increase in average cost of a student who remains in public school is on the order of $500
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