Pricing of Private Education Services in Urban India: Demand, Use and Impact
There is a large market for education services for children in the developing world, with many of these services provided by private education service providers. These services often take the form of private tutoring, serving to complement the public system, or low-cost private schools, intended to supplant the public system entirely. In spite of the dramatic increase in the prevalence of private education services, we have a limited understanding of the behavior of agents in this market. In particular, little is known about the factors influencing demand, utilization conditional on take-up (i.e., attendance), ultimately the effectiveness of these services, and how these differ by gender. For example, Tooley (2009) suggests that children in private schools attend more regularly than those in free public schools.
However, it is unclear whether attendance is a response to perceived school quality, whether children in private schools are a selected group that is more likely to attend, or if prices themselves induce parents to send their children regularly because they have paid. Perhaps more importantly, willingness to pay could be correlated with the treatment effects of these services, thus serving as an important selection mechanism. This study will focus on the interplay between prices of the services and take-up, attendance and treatment effects of these services, as well as how effects might vary based on gender.
Our research questions will be addressed through a randomized trial in the market for group-based, after-school tutoring services in Delhi, India. This market is well established in the country, even among the poor, and is an ideal setting in which to address our research questions. The target population will be children aged 11-14 in urban slum communities in Delhi. The classes are being administered by Pratham Education Foundation, a large NGO offering education services to low income households throughout India.
Our design utilizes experimental variation in the prices faced by households for these classes. We will set random prices for enrollment in these classes, and conditional on acceptance of that price, a randomly assigned discount will be offered. This two-part pricing design allows us to separate willingness to pay for the classes from the final price paid, thereby allowing us to separately identify how prices change the population willing to take up and how prices can change usage behavior of those who do take up. Our methodology also allows us to estimate whether the effects of the classes on learning vary by the household’s willingness to pay. For each of the effects we study, we will estimate heterogeneity by the gender of the child.
This study will serve as a starting point for a broader agenda examining how prices work within private education markets and the effects of alternative pricing policies in these markets.