Public Education, Communities, and Vouchers

This paper examines the effects of school vouchers on public school quality in a simple two-community model with local provision of education. Individuals differ only by income and one community imposes a fixed exogenous costs on its residents. The equilibria of the model are stratified with the rich community providing better education with a lower tax rate. We show that the introduction of a simple voucher system can result in a Pareto improvement as an equilibrium phenomenon. This improvement brings higher education quality to both communities. However, the quality difference between communities is shown to increase in equilibrium.