Crude oil cycles and the choice of private vs public school: Evidence from Saudi Arabia

Abstract

We show how in Saudi Arabia, a country that relies heavily on crude oil exports, negative shocks in crude oil prices significantly impact households’ decisions to invest in education. Our findings reveal that the downturn in the oil market, which began in the second half of 2014, led parents to refrain from sending their children to tuition-based private schools. In some cases, they even withdrew their children from such schools and enrolled them in free public schools, despite perceiving lower education quality in the public sector. The influence of the oil downturn on private school enrollments varied depending on the type of school. In national private schools, which follow the national curriculum, the growth rate of Saudi students decreased from 6 percent prior to the shock to -3.8 percent in the academic year of 2018. Conversely, in international private schools, which offer international curricula and tend to charge higher fees, the growth rate declined from 40 percent before the shock to 23.8 percent in the academic year of 2017. Furthermore, our study reveals that the recovery rate of national private schools, following the rebound in oil prices, exhibited significant variation across cities, genders, and educational levels. This heterogeneity highlights the diverse impact of the oil downturn shock.