IZA DP No. 10612: The Private Schooling Phenomenon in India: A Review
This paper examines the size, growth, salaries, per-pupil-costs, pupil achievement levels and cost-effectiveness of private schools, and compares these with the government school sector. Official data show a steep growth of private schooling and a corresponding rapid shrinkage in the size of the government school sector in India, suggesting parental abandonment of government schools. Data show that a very large majority of private schools in most states are 'low-fee' when judged in relation to: state per capita income, per-pupil expenditure in the government schools, and the officially-stipulated rural minimum wage rate for daily-wage-labour. This suggests that affordability is an important factor behind the migration towards and growth of private schools. The main reason for the very low fee levels in private schools is their lower teacher salaries, which the data show to be a small fraction of the salaries paid in government schools; this is possible because private schools pay the market-clearing wage, which is depressed by a large supply of unemployed graduates in the country, whereas government schools pay bureaucratically determined minimum-wages. Private schools' substantially lower per-student-cost combined with their students' modestly higher learning achievement levels, means that they are significantly more cost-effective than government schools. The paper shows how education policies relating to private schools are harmful when formulated without seeking the evidence.