In 2016, the Liberian government delegated management of 93 randomly selected public schools to private providers. Providers received US$50 per pupil, on top of US$50 per pupil annual expenditure in control schools. After one academic year, students in out-sourced schools scored 0.18 σ higher in English and mathematics. We do not find heterogeneity in learning gains or enrollment by student characteristics, but there is significant heterogeneity across providers. While outsourcing appears to be a cost-effective way to use new resources to improve test scores, some providers engaged in unforeseen and potentially harmful behavior, complicating any assessment of welfare gains.
That is by Mauricio Romero, Justin Sandefur, and Wayne Aaron Sandholtz in the new AER. The gains are real, and not the result of student selection. That said costs are higher with the private contracting. Better partner selection would have improved the program greatly, though the authors note that some of the most promising partners ex ante ended up being the biggest troublemakers ex post. Some of the schools, for instance, allowed a possibly unacceptable degree of sexual abuse of the students. There is perhaps potential for dynamic reoptimization of permissible partners to yield very real gains, though this may or may not be supported by the available political economy incentives.
The authors suggest, by the way, that outsourcing or contracting out to the private sector often does better when quality is relatively simple, such as with water services, food distribution, and simple forms of primary health care, such as immunization. In their view, for advanced health care and prisons, contracting is less effective, due to the vaguer nature of product quality.
This is in any case a very important paper, likely to be one of the best and most significant of the year.