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Estimating the Welfare Effects of School Vouchers

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Abstract: We analyze the welfare effects of voucher provision in the DC OpportunityScholarship Program (OSP), a school voucher program in Washington, DC, thatrandomly allocated a voucher to students. To do so, we develop new discretechoice tools to learn about the average willingness to pay for a voucher of agiven amount and its average costs in a nonparametric model of school choice.Our tools exploit the insight that these welfare parameters can be expressed asfunctions of the underlying demand for the different schools. However, whilethe random allocation of the voucher reveals the value of demand at two prices,the parameters generally depend on their values beyond these prices. Our toolsshow how to sharply characterize what we can learn when demand is allowed toremain entirely nonparametric or to be parameterized in a flexible manner, bothof which imply that the parameters are not necessarily point identified.Applying our tools to the OSP, we find that provision of the status-quo as wellas a wide range of counterfactual voucher amounts has a positive net averagebenefit. These positive results arise due to the presence of many low-tuitionschools in the program; removing these schools from the program can result in anegative net average benefit.

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