Educational for-profit charter schools do worse in Sweden

I estimate the long-run earnings impacts of for-profit and non-profit charter high schools in Sweden. Since the 1990s, privately managed schools have expanded dramatically—driven entirely by for-profit providers—and now enroll nearly half of urban high school students. Unlike in many other settings, there are no schools operating outside of the public system: all schools rely on equal public funding, cannot charge top-up fees, and are subject to the same regulation. Using a combination of value-added and regression discontinuity methods, I find that charter school attendance reduces long-run earnings by 2% on average—comparable to the returns to half a year of schooling in similar settings. For-profits generate these losses by hiring less-educated, lower-paid teachers, consistent with concerns around cost-cutting. By contrast, non-profits reduce earnings by specializing in arts programs: conditional on such specialization, they perform as or even better than public schools. In a discrete choice framework using rank-ordered school applications, I show that students’ preferences are weakly related to schools’ earnings impacts. Most of the for-profit market share is explained by student demand for attractive locations and study programs, presenting a trade-off between satisfying short-run demand and boosting long-run economic outcomes.

That is the job market paper from Petter Berg, from Stockholm School of Economics.