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Tuesday, September 06, 2005

UEP Exam: Impact of Quasi-market Reforms in Education

“Ten years ago 95 percent of pupils in Country A attended public schools to which they were allocated according to their place of residence. The government enacted educational reforms, which enabled parents to choose any state school for their child. Schools became funded mainly on a per pupil basis and were required to manage their own budgets. Schools were permitted to borrow from financial institutions. National tests were introduced and schools’ results published.

Explain (using theoretical arguments and empirical evidence) what you would expect to have been the impact of these reforms on the efficiency and equity of the school system after 10 years.”


In 1988, the monolithic Education Reform Act (ERA) was passed in England with the grand aims of raising standards, extending choice and producing a better educated Britain (Baker, 1987). Through this act, market based reforms remarkably similar to those in Country A as stated above were instituted, in the hope that market forces would inject a new vitality into the system. In this essay, the economic concepts of efficiency and equity will first be briefly explained, before going on to explain theoretically, and with empirical evidence from the ERA how the reforms above might be expected to influence the efficiency and equity of the school system.

First of all, efficiency refers to a relationship between inputs and outputs, and is achieved by either a) maximising the level of outputs given inputs, or b) minimising the level of inputs given outputs. When a situation is said to be inefficient, this means that the desired outputs could be obtained with less inputs, or that the means utilised should be able to produce more of the desired ends.

Equity is concerned with fairness, and considers a situation fair if individuals’ outcomes are proportionate only to inputs that they control (Konow, 2003). A distinction may be made between horizontal equity and vertical equity (Musgrave 1959). The former refers to the equal treatment of equals, i.e. if Pupil A and Pupil B are equally able, then they should both have the same chances of going to the same school and getting similar educational attainments, regardless of gender, race and socio-economic class, etc. The latter refers to the unequal treatment of unequals. It may be considered vertically equitable for a pupil with special educational needs to be allocated more funding for his education.

As mentioned earlier, the reforms in Country A have been remarkably similar to that of the English ERA. In 1988, approximately 95 % of English pupils went to state schools. Open enrolment allowed parents to choose, within limits, schools for their children. Formula funding meant that schools were to be funded primarily based on age-weighted pupil numbers. Local management of schools gave schools the autonomy to manage a large proportion of a delegated budget. A national curriculum was introduced, along with assessment tests, the results of which were to be published and made available to parents. All these reforms served to form a schooling quasi-market in England, and would have formed a quasi-market in Country A as well.

Theoretically, the quasi-market in Country A may be hypothesized to boost both allocative and productive efficiency. Greater parental choice may increase allocative efficiency by allowing for parents to send their children to the ‘right school’, in so doing maximising satisfaction for each consumer (Bradley & Taylor, 2002). Delegated funding and local management of schools allow for local managers to make use of local knowledge, cut costs and maximise outputs given inputs, in so doing increasing productive efficiency. Indeed, Bradley and Taylor (2002), using data from the Schools Census and School Performance Tables, found strong evidence that the quasi-market has led to a substantial improvement in both allocative and productive efficiency, as measured by a school’s exam performance, and staff productivity (exam successes per full time employed staff) respectively. Gorard and Taylor (2002) concluded that greater improvements in GCSE results in the state sector as compared to the private sector are attributable to the market reforms of 1988. Also, headteachers have reported that, in resource management, efficiency has been encouraged by its delegation to school level (Levacic, 1995).

However, can some of these numbers be taken at face value? Firstly, are the improvements in test scores genuine, or are teachers and pupils simply getting better at taking tests? If politicians and bureaucrats are able to massage unemployment figures, are they not also able to manipulate and influence the grading of examination scripts? Also, there is the issue of causality. Are the market reforms of the ERA really responsible for improving grades? One might opine that the following are more plausible causes: the replacement of the GCE examination with an arguably easier GCSE 2 years before ERA or the abolition of norm referencing just one year before ERA. All these uncertainties make it less clear whether the empirical evidence really supports the hypothesis that efficiency would be improved. Also, measures of efficiency in most studies have been only output-based, and there is a clear need to further consider the impact of the quasi-market on costs. Otherwise, findings on efficiency should be regarded as only preliminary and partial.

Critics of marketisation in educational systems point out that there would be a trade-off between efficiency and equity, and a detrimental effect on educational equality. They predict that markets and competition would lead to greater social polarisation between and within schools: middle class children will be concentrated in ‘popular’ effective schools, while working class parents will be in declining ‘sink’ schools. One of the major ways that equity might be threatened is the phenomena of cream-skimming. Student performance in national testing has been shown to be largely dependent on socio-economic background (Willms 1986; Coleman 1966) and a school may be tempted to maximise its league table position, demand for its places and therefore its level of funding by maximising the examination results of its students at minimum costs by cream skimming students from higher socio-economic class (Glennerster, 1991). Fears about cream-skimming in England have been real. Schools have been shown to seek out and select particular types of pupils, e.g. those from the middle class, based on their abilities to boost average test scores, at the expense of the ‘less able’, such as children with Special Educational Needs (Gewirtz et al., 1995; West et al., 2004).

Equity might be threatened because of the pressure on schools to restructure teaching in order to attract ‘desirable’ school children. Such a restructuring would include ‘setting’, which is popular with middle class parents, but has been shown to negatively impact other groups. Ball (1981) found that teachers for bottom sets tend to be less experienced and junior, and pupils in bottom sets are predominantly black and white working class, while those in top sets may be ‘uniformly white’ (Gillborn & Gipps, 1996). Equity might also be threatened if parents are differentially capable in navigating the educational marketplace. Ball et al (1996) suggest that ‘privileged’ choosers, such as middle class parents, have the cultural capital and educational knowledge to come up trumps in the local schooling market, at the expense of working class ‘disconnected’ or ‘semi-skilled’ choosers.

Most studies on the equity effects of the ERA, including those mentioned above, are qualitative and based on a limited number of case studies. Because of their small sample size and lack of consistent and longitudinal quantitative measures of social polarisation or equity, their results cannot be easily generalised or extrapolated to Country A without taking into account the differing contexts.

Rather surprisingly, when Gorard and Fitz (1998) used data on the eligibility for free schools meals as an indicator of poverty to examine the spread of eligible pupils across English secondary schools, reported an initial increase in segregation in the first few years after the introduction of the ERA, but falls in segregation thereafter. The net result after 10 years has been less polarisation and greater social equality, which contradicts the findings of many sociologists such as Ball, Reay and Gewirtz. Perhaps Tooley (1995) is right then, that markets in giving working class parents the option of ‘exit’, allow them to vote with their feet, to leave poorer schools and to make their way to better schools.

To sum up, theory and evidence seem to suggest that with the introduction of the quasi market through the assortment of reforms set in place in Country A, efficiency may be expected to be improved at the expense of equity, though this is by no means certain, as there are credible theories and evidence to the contrary as well as nagging doubts over causality. Work has to be done in Country A itself, instead of simply deducing the effects of the reforms from theory or extrapolating from studies done elsewhere.

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