Press Release
Design of Voucher Programs Is Critical to Achieving Education Policymakers’ Intended Outcome
September 29, 2010
Note to Editors
The Federal Reserve Bank of New York today released Program Design, Incentives, and Response: Evidence from Educational Interventions, the latest paper in the Bank's Economic Policy Review series.

The design and incentive structure of educational reform programs are critical to their effectiveness and outcome. School voucher programs that present failing public schools with functional and credible sanctions have the potential to produce the results intended by education policymakers, according to a new paper released by the Federal Reserve Bank of New York. Additionally, the lessons drawn from this study may prove applicable and beneficial for other school systems seeking reform, including those in New York City.

In this paper, author and New York Fed economist Rajashri Chakrabarti examines and evaluates the effectiveness of educational reform efforts that incorporate school vouchers—scholarships that permit students to transfer from public to private schools—to address concerns that U.S. students are not performing as well in math and science as their counterparts in other developed countries.

To determine the effectiveness of such programs, Chakrabarti analyzes two such educational interventions in the United States—the Milwaukee and Florida voucher programs—and estimates the impact of each program by comparing the post-program results of the affected schools with a comparable set of control schools.

Under the Milwaukee program, vouchers were imposed from the outset so that all low-income public school students became eligible for vouchers to transfer to private schools. In contrast, schools in the Florida program were first threatened with vouchers, with students of a particular school becoming eligible for vouchers only if the school received two “F” grades in a period of four years. Unlike the Milwaukee schools, threatened Florida schools had an opportunity to avoid vouchers. Using data from Florida and Wisconsin, the study shows that the performance effects of the threatened public schools under the Florida program exceeded those of corresponding schools in Milwaukee.

Chakrabarti concludes that program design is critical. That is, policies that present failing public schools with functional and credible sanctions are best suited to produce the results intended by education policymakers. The lessons of this study are broadly applicable to New York City’s educational reform efforts. As in Florida’s program, public schools in New York face valid sanctions if they fail to perform; therefore, the city’s low-performing schools have an incentive to avoid sanctions, and one would expect them to respond as Florida’s schools have.

Rajashri Chakrabarti is an economist at the Federal Reserve Bank of New York.

Program Design, Incentives, and Response: Evidence from Educational Interventions ››

Contact:
Eric Pajonk
(212) 720-1735
(646) 720-1735
eric.pajonk@ny.frb.org

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