Are Private Schools Better?

By Richard Vedder

Controlling for tuition levels, SAT and ACT scores, the percent of applications that actually enroll (a measure of selectivity), demographic characteristics of the students, etc., should private schools perform any different than public ones with respect to the percent who graduate within six years?

The work that the Whiz Kids and I are doing suggests that that the answer is yes --a statistically significantly larger proportion of students at private four year institutions receive degrees than at two year institutions. This sort of surprised me, since in our regression analysis we have controlled for the major differences between the two types of institutions, admissions selectivity, test scores, and tuition costs. While in most areas of human endeavor, most researchers have found the private sector does things better, cheaper and more efficiently, I have never felt that applied to higher education. So-called "private schools" get a lot of direct or indirect government support, and the non-profit nature of both types of institutions is what governs human behavior more than the legal form of ownership. Unlike in the market economy, where the private sector has better incentives to be good and incentive, in higher education the incentive systems seem similar in both types of institutions. But maybe I am wrong.

Are private schools doing a better job of getting kids through school? It is worth further investigation. CCAP will be pondering and researching this issue. If it is true, it may have important policy implications for how we allocate governmental higher education resources. In particular, it strengthens the already strong case of giving money not to institutions, but to students, and let them choose their own school, public or private.