Enhancing Excellence: Trade-Off between Socially Motivated and Profit Motivated Private Schools in Nepal

Abstract

Investment in schooling is central to enhancing excellence in education and in turn productivity. This paper provides new evidence questioning the unconditional superiority of any private schools from a national school-leaving examination database of Nepal. Using IV identification strategy to minimise the selectivity bias of school choice, we compare student performance in heterogeneous private schools in pooled cross-sections, subject fixed effects and value-added models over time, with a view to assess their absolute as well as relative efficiency reflecting the value for money spent per student. It is the not-for-profit trust-run private schools that outperform others because they invest more in teaching and learning related infrastructure, thus highlighting the benefits of social motivation for private provision of schooling. As expected, the full sample results are driven by the results for the urban areas where it is easier for trust school to enhance excellence by hiring good teachers as well as ensuring efficient utilisation of good teachers through greater parental involvement. While profit can be good driver of private investment in starting new schools, it may fail to generate high test scores over longer time horizon. Undoubtedly, the quality of education matters which is unlikely to be sustained by the profit motive alone.