International Evidence on Public-Private Partnerships to Improve Access and Quality in Education Harry Anthony Patrinos World Bank October 2007

Public-Private Partnerships: Defined No fixed definition of PPPs Definitions differ in terms of scope and formality of arrangements Various definitions: “risk sharing relationship based upon an agreed aspiration between the public and private sectors to bring about a desired public policy outcome.” – Commission on UK PPPs “cooperative venture between the public and private sectors, built on the expertise of each partner, that best meets clearly defined public needs through the appropriate allocation of resources, risks and rewards.” – Canadian Council for PPPs

Common Elements Formal arrangement with contractual basis Involve public and private sectors Outcome focus Sharing of risks/rewards between public and private sectors Recognize complementary role of public and private sectors

Role of Government in Education Rationale for government involvement in education: Externalities Capital market imperfections Agency concerns Equity Information asymmetries Government has a variety of policy instruments at its disposal in order to meet its policy objectives: Ownership/Delivery Funding Regulation/Information PPPs recognise that governments can meet their policy objectives using different service delivery models – not just ‘traditional’ public finance/public delivery model

Financing and Provision

Benefits of Public-Private Partnerships Increase efficiency – improved performance incentives and increased competitive pressure Improved quality of service delivery Secure specialized skills that may not be available in government agencies Overcome public service operating restrictions – obsolete salary scales, out of date civil service work rules, etc Permit quicker response to changing demands and facilitate adoption of service delivery innovations

Benefits of PPPs (cont’d) Benefit from economies of scale regardless of the size of the government entity Allow government agency to focus on functions where it has a comparative advantage Increase access, especially for groups who have been poorly served under traditional forms of service delivery Increase transparency of government spending by making the cost of services more visible

Types of PPPs in Education What government contracts forDefinitionContract types 1 Management, professional services (input) Government buys school management services or auxiliary and professional services Management contracts Professional services contract (curriculum design) 2Operational services (process) Government buys school operation services Operational contracts 3Education services (output) Government buys student places in private schools (contracts with school to enroll specific students) Contract for education of specific students 4Facility availability (input) Government buys facility availability Provision of infrastructure services contracts 5 Facility availability and education services (input and output bundle) Government buys facility availability combined with services (operational) Provision of infrastructure contracts with education services contracts Source: World Bank 2005

Examples of Education PPPs Government contracting with private schools Private management of public schools Infrastructure PPPs Vouchers/subsidies Public/private sector affiliation arrangements Private sector regulation Innovation and research PPPs

Examples of PPPs Type of PPPExamples Contracting for the Delivery of Education Services Government sponsorship of private school students, Cote d’Ivoire Education services contracting, Philippines Alternative education, New Zealand Universal post primary education & training policy, Uganda Fe y Alegria, South America & Spain Private Management of Public Schools Concession schools, Bogota, Colombia Railways schools, Pakistan Independent schools, Qatar Quality education for all, Punjab, Pakistan CDG Lahore/CARE schools, Pakistan Contract and charter schools, USA Transformed schools, China Infrastructure PPPs Private Finance Initiative, UK Proyecto Prestacion de Servicios, Mexico New Schools Private Finance Project, Australia PPPs for Educational Infrastructure, Canada Offenbach & Cologne Schools Projects, Germany Swinburne University of Technology, Australia National Maritime college, Ireland Montaigne Lyceum, The Hague, Netherlands

Examples of PPPs (cont’d) Type of PPPExamples Vouchers/Subsidies PACES, Colombia Targeted individual entitlement, independent school subsidies, New Zealand Private school subsidies, Cote d’Ivoire School funding, Netherlands, Denmark, Sweden Milwaukee Parental Choice Programme, USA Punjab Education Foundation programs, Pakistan Private Sector Quality Assurance USA, Oman, Philippines Public/Private Sector Affiliation Arrangements Ghana, Sri Lanka, Pakistan, China, New Zealand, South Africa Innovation and Research PPPs Government programs encourage industry-public research institute research. Netherlands Government programs encourage industry-research institute partnerships and promote commercialization of public research, Australia

Contracting Models in Latin America

Programs Private management of public schools Management contracts, professional services, operational contracts Charter schools, concession schools, etc. Involves governments or public authorities contracting directly with private (for- & non-profit) providers to manage public school Schools remain ‘free’ to students – no fees Schools responsible for all aspects of school operation Used mostly in disadvantaged areas Contract for education of specific students Vouchers, scholarships, direct funding of private (& public) schools

Evidence on PPPs Limited rigorous evidence on impact Ideal evaluation involves random assignment & use true control group or natural experiment Much debate over impact of vouchers in Chile and USA, remain controversial Many studies on impact of charter schools, though few randomized trials

USA: EMO Managed Schools/Enrollments

National Charter School Research Project 2007

Fe y Alegría Schools in South America

Concession Schools, Bogota, Colombia Private schools contracted to manage poorly performing public schools 25 schools serving over 26,000 students – disadvantaged students Autonomous 15 year contract Designed to overcome problems faced by public schools – inability of schools to hire own staff, lack of labour flexibility, bureaucracy Schools paid $500 per student per year – below public school unit cost

Evaluation of Proposals

Monitoring & Evaluation Inspect school property administration Supervision visits to observe adherence to pedagogical norms and standards Independent evaluation of finances to see if academic objectives met

Impact Evaluation Propensity score and matching estimation technique (Barrera 2006) Hypotheses: Dropout rates are lower in concessions schools than in similar, public schools No effects (yet) or small ones on test scores Nearby schools have lower dropout rates than public schools outside the influence of concessions

Test Scores Public schools have lower test scores Concession and public non-concession schools are “similar”

Findings Strong evidence of a direct effect of Concession Schools on dropout rates and some evidence that they had an impact on dropout rates on nearby public schools Positive impact on students’ test scores relative to those in public schools Dropout rates were 1.7 points lower, while mathematics and language scores were 1 point and 2 points higher than students in similar public schools

Dropout Results: Impact Matching: 10 nearest estimators, common support, balance groups Direct Effect: reduction in 1.7 points dropout rates Indirect Effect: reduction in 0.82 points

Test Results: Impact Matching: 10 nearest estimators, common support, balance groups Effect over math test scores: improvement of 2.4% Effect over language test scores: improvement of 4%

National Voucher Program, Chile Nationwide voucher program implemented in 1980 Applies to public & private schools – secular & religious Monthly payments made to schools on per-student basis Voucher schools must follow operational guidelines (basic facilities, certified teachers, class size) Vouchers cover most or all tuition at eligible schools

Enrollments Shares, Public vs Private Schools, Chile

Test Score Effects from Selected Studies on Chile Voucher Program Private SubsidizedCatholic SubsidizedPrivate Non-subsidized Bravo et al (1999)=+ Gallegos (2002)+ Carnoy & McEwan (2000)-++ Mizala & Romaguera (1999)=+ Sapelli (2003)+ Vegas (2002)=++ McEwan (2001)=== Mizala & Romaguera (2003)++ Sapelli and Vial (2002)+ Mizala and others (2004)++ Source: Adapted from Bellei (2006)

“When Schools Compete, How Do They Compete?” While private enrollment rate increased by 20 points, greater impacts in larger, more urban, wealthier communities Hsieh and Urquiola (J Public Economics 2006) use this differential impact to measure effects of unrestricted choice on outcomes using panel data for 150 municipalities They find no evidence that choice improved average outcomes (test scores, repetition, years of schooling) They do find evidence that voucher led to increased sorting, as the “best” public school students left for private sector

More on Chile Finding a rule about arbitrary assignment to treatment that mimics randomization is very important (Hoxby 2003) Researchers need to find control schools that were excluded from the reform for some reason that is uncorrelated with factors that affect their future performance Such arbitrary exclusion can sometimes be found in policy rules or natural events In some school choice reforms, no arbitrary exclusions exist When Chile introduced school choice, same law applied across entire country so variation in choice entirely endogenous, and no pre-treatment data exists Thus, researchers have neither pretreatment trends nor arbitrary assignment to treatment, and none of studies on Chilean vouchers is sufficiently credible to be given much weight

Colombia: Colombia: Plan de Ampliación de Cobertura de la Educación Secundaria (PACES) Introduced in Colombia in early 1990s Provided 125,000 vouchers from Offered vouchers to students entering 6th grade, start of secondary school Key elements of program: vouchers available to children from low-income families who had attended a public primary school & accepted at private school renewable subject to satisfactory academic performance value = $190; half the cost of private secondary school school received voucher funds directly from the bank schools were allowed to charge top-up fees; and there was minimal regulation of private schools

PACES Voucher, Colombia Voucher program designed to give students from poor families access to secondary schooling (Angrist & others 2002, 2006) Randomized trial – students randomly selected through a lottery system and given vouchers to attend secondary school Findings: Lottery winners were 15-20% more likely to attend a private school, 10% more likely to complete 8th grade and scored 0.2 standard deviations higher on standardized tests Program effects larger for girls Program cost less than the unit cost in the public sector Longer-term positive effects – lottery winners more likely to take college entrance exam Increase in (proxy) high school graduation rates of 5-7 percentage points, relative to a base rate of 25-30%

PACES Voucher, Colombia IndicatorImpact – PACES Voucher Students Were: Years of Schooling10 percentage points more likely to finish 8th grade Grade Repetition 5-6 percentage points less likely to repeat a grade than non-voucher students Test Scores Scored 0.2 standard deviations higher on achievement tests Finished High School5-7 percentage points higher than non-voucher students Take College Entrance Exam15-20% more likely to take the college entrance exam College Exam ScoresMore likely to score 2 points higher than non-voucher Employment percentage points less likely to be working than non-voucher students Being Married or Cohabitating percentage points less likely to be married or living with someone than non-voucher students

PACES Voucher, Vocational Voucher skeptics argue that even if vouchers benefit recipients, they do so by improving their peer groups at the expense of others’ Therefore they do no benefit society as a whole This requires that voucher recipients have more desirable peers than they otherwise would have Bettinger, Kremer, Saavedra (2007) look at applicants for whom winning voucher did not lead to attending schools with peers with superior observable characteristics They focus on those who applied to vocational private schools Lottery losers were more likely to attend academic secondary schools Find that lottery winners had better educational outcomes, including higher graduation rates & reading test scores Casts doubt on argument that voucher effects operate entirely through improving peers available to recipients

Education Contract Options and Potential TypeInternational experiencePolicy suggestion VoucherExtensive Expand, but based on rigorous evaluations Charter schools Significant, inconclusive evaluation findings Evaluate; consider PFIs: Contracting for private financing and construction of schools A few countries have experience; shown moderate success Consider with caution; evaluate PFIs Contracting for private actors to run schools, as well as finance and build them None (yet)Given potentially high returns, worth considering, but need a plan to involve providers and financiers, and evaluation of pilot

Contracting Guiding Principles Enabling policy, regulatory Split purchaser/provider role Capacity of contract agency Transparent, competitive selection Staged selection process Performance measures, incentives, sanctions Effective contract monitoring Providers maximum flexibility Long-term contracts with providers Independent evaluation World Bank 2006