Old School or New School? Effects of School Openings on Student Outcomes in a Degregulated Education Market

Proponents of school choice argue that deregulating public education would allow for new firms to enter the market, generating competitive pressure on existing schools to increase educational quality. Although there exists a large school choice literature evaluating whether competitive pressure, created by more schooling options, leads to achievement gains, little attention has been paid to the direct effect of introducing new schools to the marketplace on student outcomes. This study provides some of the first evidence concerning the effects of school openings in a deregulated market. Specifically, we study school openings in Michigan where students can participate in interdistrict, intradistrict, and charter school choice. Furthermore, no caps exist for the number of charter schools or the number of students who can attend a school outside of their resident district, and universities and colleges can authorize charter schools anywhere in the state. In fact, there have been over 500 school openings in the past decade, a third of which have been charter schools. Thus, this setting provides the ideal situation to evaluate whether market induced changes in the supply of schools increase achievement. In accordance with prior literature concerning newly built schools, our preliminary results suggest that students who attend newly opened schools experience a decrease in achievement in the first year the school is open with increases in test scores in future years. These results may imply that new schools, whether or not they are located in new buildings, may need extra support in the first year from their district or management organization in order to offset the initial negative effects of school openings.