DP8272 Scale economies can offset the benefits of competition: Evidence from a school consolidation reform in a universal voucher system

Author(s): Monique de Haan, Edwin Leuven, Hessel Oosterbeek
Publication Date: February 2011
Keyword(s): Scale economies, School choice, School consolidation, Student achievement
JEL(s): D40, H75, I21, I22
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8272

A large school consolidation reform in the Netherlands changed minimum school size rules underlying public funding. The supply of schools decreased by 15 percent, but this varied considerably across municipalities. We find that reducing the number of schools by 10 percent increases pupils' achievement by 3 percent of a standard deviation. A reduction in the supply of schools implies, for a given number of pupils, an increase in average school size. We present evidence that in our context scale economies dominated the effects of choice and competition. This points to an often ignored trade-off between scale and competition.