Working Paper Series
Marketized Education: How Regulatory Failure Undermined the Swedish School System
Abstract: In a radical school choice reform in 1992, Sweden’s
education system was opened to private competition from independent
for-profit and non-profit schools funded by vouchers. Competition was
expected to produce higher-quality education at lower cost, in both
independent and public schools. This article analyzes whether the school
choice reform was institutionally secured against school competition based
on phenomena that are unrelated with educational quality. Interviews with
key personalities reveal that the architects of the reform overemphasized
the virtues of market reforms and therefore did not deem it necessary to
establish appropriate rules and institutions for school competition.
Instead, ill-conceived grading and curriculum reforms paved the way for
moral hazard resulting in grade inflation and other forms of unintended
school competition. The lesson from Sweden’s experience is that market
reforms of public services production, particularly those that introduce
for-profit producers, must account for how institutions and incentive
structures affect behaviour.
Keywords: School choice; grade inflation; institutions; hazardous adjustment; (follow links to similar papers)
JEL-Codes: D02; D62; I28; (follow links to similar papers)
36 pages, December 5, 2016, Revised October 1, 2017
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