While most of the charter school literature focuses on student achievement effects, relatively little attention has been given to the determinants of charter school entry. The decision to open a charter school can be viewed as analogous to firm entry, where providers respond to perceived opportunities in local education markets.
Maria Marta Ferreyra and Grigory Kosenok study charter entry and household school choice in Washington, D.C. They document patterns of charter entry by geography, curricular focus, and grade span to better understand the opportunities exploited by charter operators. They develop and estimate an equilibrium model of charter school entry and school choice that captures how households sort among traditional public, private, and charter schools, and how the entry, exit, or relocation of a school affects other schools in the market. Their methodology also incorporates the central role of charter authorizers, estimates welfare gains from charter schools, and evaluates how the education landscape responds to regulatory changes through counterfactual simulations.
Their estimates suggest that during the first 11 years of charter schooling in Washington, D.C., charter entry generated substantial net social benefits by expanding school options, particularly for non-white, low-income, and middle school students. Counterfactual simulations indicate that policies combining selective charter approval with measures that increase the supply of potential entrants—such as reducing entry costs by facilitating access to unused public school buildings—can generate sizable welfare gains. For poor, non-white families located near low-quality public schools, these gains average about 3 percent of income, although such policies produce limited improvements in academic proficiency.
In contrast, simulations of school closures show that while student proficiency may rise due to reallocation to higher-quality schools, most students experience welfare losses from reduced school choice. In the short run, closing an average charter school imposes larger welfare losses to students than closing a low-enrollment public school. Consequently, losses associated with public school closures may be mitigated over time through the entry of new charter schools that absorb displaced students.
Journal Article: https://doi.org/10.1016/j.jpub...
Working Paper: https://papers.ssrn.com/sol3/p...