The Effect of Charter Schools on Districts’ Student Composition, Costs, and Efficiency: The Case of New York State

Abstract

Charter schools can influence a school district's costs by reducing economies of scale and by changing the share of high cost students a district serves, but might also increase the district's efficiency through competition. Utilizing data for New York State school districts from 1998/99 to 2013/14, we estimate difference-in-differences models to assess the effect of charter schools on enrollment and student composition. Then, we estimate an expenditure function, using data prior to the charter school program, to measure the costs associated with reaching a given performance standard for students in various need categories and different enrollments. Next, using the entire data set, we run a second expenditure function to determine changes in efficiency associated with charter school entry. We find that charter schools increase the cost of providing education, and that these cost increases are larger than short-run efficiency gains, but are offset by efficiency gains in the long term.