The impact of competition on costs within Sweden's educational sector - the effects of market forces on public expenditures

Abstract: When the Swedish educational voucher system was introduced in the beginning of the 1990s, an important rationale was the alleged ability of competition from independent schools to trim costs within the educational sector. In this thesis we study both the elementary and upper-secondary levels of education and employ an econometric approach with panel data regressions to estimate i) the effects of increased competition from independent schools upon the total cost for the municipality per student recorded as living there and ii) the effects from decreased student enrollment on costs within public schools. Our findings imply that the effects differ across levels of education and geographical regions and that increases in competition do not appear to guarantee lower costs for education. We also find support for the notion that economics of scale within public upper-secondary schools induces cost increases as a corollary of decreased student enrollment. This occurs without increases in the fraction of total cost devoted to expenditures such as teaching and educational material. Our results indicate that competition is by no means a universal driver of cost decreases within the educational sector and that higher per student costs for public schools as a result of falling student enrollment may contribute to the failure of market forces to drive down costs.