An empirical assessment of households sorting into private

Working Paper 2015-356

Abstract

We estimate structural quantile treatment effects to analyze the relationship between household income and sorting into private or public education, using Italian data. Public education provision is redistributive when rich families, who contribute to its financing, find it optimal to sort out of the public system to buy the educational services in the private market. This may occur when the education quality is lower in the public compared to the private sector, meaning that households with higher income capacity face lower opportunity costs from sorting out of the public system. We exploit heterogeneity in expected tax deductions to exogenously manipulate the distribution of net of taxes income, equalized by family needs, and explore the consequences of this manipulation on various quantiles of the distribution of the amount of the educational transfers in-kind accruing to the households, valuing public education. We find that an increase in income reduces the amount of educational transfers in-kind (i) more for higher quantiles of the educational transfers in-kind, indicating that households with higher preferences for quality sort out of the public education system; (ii) more for lower quantiles of the households’ income capacity, indicating that richer households

Authors: Francesco Andreoli, Giorgia Casalone, Daniela Sonedda.