Would Privatization of K-12 Schooling Lead to Competition and Thereby Improve Education? An Industrial Organization Analysis

Abstract

Some scholars have argued that to improve K-12 education, we should eliminate public schools and let private schools compete for students. Missing from such proposals is analysis of K-12 schooling to determine its propensity for competition. In this article, the author develops a working definition of the K-12 education industry, presents characteristics of other industries that industrial organization economists have determined undermine the operation of a competitive marketplace, and considers whether these characteristics apply to K-12 schooling. Some conditions—ease of entry into the market, product differentiation, and availability of resources—support competition. However, large economies of scale in a local market and relative price inelasticity of demand imply monopolies and trusts. Also, inadequate information and probable external costs suggest considerable regulation would be needed. The author tentatively concludes that the industry will not be competitive but emphasizes the potential of industrial organization analysis rather than the author’s conclusion.