Information asymmetry and equilibrium monitoring in education

Abstract

We develop a theoretical and computational model of school choice and achievement that embeds information asymmetries in the provision of education. Because school effort is unobservable to households and policymakers, schools have an incentive to under provide effort. This moral hazard affects both public and private schools, although public schools are subject to an additional distortion because of limited competition and fixed funding. Household monitoring of schools can mitigate moral hazard, but some households may free-ride on the monitoring of others. Using our calibrated model we simulate two policies aimed at raising achievement: public monitoring of public schools and private school vouchers. Our results indicate that in large scale settings no single tool may suffice. The reason is twofold: a) no tool raises achievement or welfare for all households; and b) since the extent of moral hazard is endogenous, the application of each tool has unintended consequences that limit its own effectiveness. Results also indicate that setting the policy parameters for public schools at the levels preferred by the majority of households may mitigate the distortions. Nonetheless, the current actual values of these parameters seem to match more closely the preferences of public schools than the preferences of parents.

Accountability in US Education: Applying Lessons from K–12 Experience to Higher Education

“…Thus, external accountability works best when institutions would not otherwise face strong internal or community pressures to improve. Families can hold schools accountable by monitoring school performance, and such monitoring may be more intense among affluent households (Ferreyra and Liang 2012). Moreover, affluent families may be more likely to sort across neighborhoods in response to perceived changes in school quality, which also places accountability pressure on schools (Bayer, Ferreira, and McMillan 2007).…”

Immigration and the school system

“…10 Sahin (2004) provides another example of how parent and students' responses affect the impact of education policies for the case of higher education tuition subsidies. Evidence of the interaction between parents and the school system mediated by monitoring of schools is offered by Ferreyra and Liang (2012). 11 Parental involvement includes activities at home like supervising children, explicit help with the homework, discussing school issues and providing reward schemes as well as school based activities like volunteering at school, attending school functions.…”

Asymmetric Salary and Uniformity of Academic Positions at Universities in the EU28

“…An educated population is a fundamental ingredient for a well functioning democracy and a crucial driver of growth in the modern economy [8]. Implement a European academic education model involves a balance between the States of wage levels and re-turns on education.…”