published in: Education Economics, 2004, 12 (1), 17-38
The paper presents a model of educational production which tries to make sense of recent
evidence on effects of institutional arrangements on student performance. In a simple
principal-agent framework, students choose their learning effort to maximize their net
benefits, while the government chooses educational spending to maximize its net benefits. In
the jointly determined equilibrium, schooling quality is shown to depend on several
institutionally determined parameters. The impact on student performance of institutions such
as central examinations, centralization versus school autonomy, teachers' influence, parental
influence, and competition from private schools is analyzed. Furthermore, the model can
rationalize why positive resource effects may be lacking in educational production.
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