EDUCATION FINANCE & MARKET DYNAMICS
School funding and market forces play a crucial role in shaping educational outcomes. LEAPS research uncovers how grants, innovative financing, and shifting market equilibria impact both private and public schools in Pakistan. Explore the studies below to see how financial strategies affect the schools’ ability to serve students.
Loans and Support Services for Private Schools
Authors: Tahir Andrabi, Jishnu Das, Asim I. Khwaja, Selcuk Ozyurt
Citation: Andrabi, Tahir and Jishnu Das and Asim Ijaz Khwaja and Selcuk Ozyurt. 2025. “Helping Schools Survive: Experimental Evidence on the Impact of Financial and Educational Support to Private Schools”, NBER Working Paper No. 34042.
Questions and Findings
Can providing low-cost private schools in low-income communities with access to commercially viable loans and educational service products (EPS) help them avoid closure? Which types of schools benefit most, and what does this reveal about barriers in private education markets?
Commercial Viability: 36% of schools took loans and 27% purchased EPS products at market rates, with loans yielding a 27.18% return—demonstrating both products are sustainable and unsubsidized.
Reduced School Closures: Loans cut closure rates by 16–20 points; EPS products by 28–33 points over four years. Both effects were similar, with no added benefit from combining them.
Targeted Loan Effectiveness: Loan impact was strongest for schools with lower test scores (30 vs. 9 points reduction, 20th vs. 80th percentile) and larger enrollments (41 vs. 1.8 points reduction). EPS effects did not vary by these factors.
Loans as Safety Net; Revealing a Missing Market: Loans acted as a financial safety net for vulnerable schools, while both loan and EPS impacts highlight that there was previously a missing market for these types of financial and educational products.
Why This Matters
In many underserved areas, low-cost private schools provide vital educational opportunities where public options are limited, yet financial vulnerability leaves them at risk of closure and disruption to students' learning. Expanding access to credit empowers these schools to weather economic shocks, maintain operations, and invest in educational quality, helping to close equity gaps for low-income families.
For policymakers, building financial resilience among private schools is a practical strategy to protect community stability, enhance social mobility, and safeguard children’s educational pathways where government resources are stretched.
Grants to Public Schools: Crowding in Private Quality
Authors: Tahir Andrabi, Natalie Bau, Jishnu Das, Naureen Karachiwalla, and Asim Ijaz Khwaja
Citation: Andrabi, Tahir, Natalie Bau, Jishnu Das, Naureen Karachiwalla, and Asim Ijaz Khwaja. 2024. “Crowding in Private Quality: The Equilibrium Effects of Public Spending in Education.” Quarterly Journal of Economics 139(4): 2525–2577.
Questions and Findings
How does extra government funding to public schools affect student learning and other education outcomes in villages where private schools are also competing? Does competition from private schools shape the effectiveness of public grants, and what are the mechanisms behind any observed impacts?
Public investment raised student learning: Allocating extra resources to public schools increased their test scores by about 0.2 standard deviations.
Private schools also benefited: Test scores in private schools rose by 0.16–0.32 standard deviations, indicating sector-wide improvement and a positive multiplier effect.
Different improvement strategies, real learning gains: Public schools mainly hired more contract teachers, while private schools hired more highly qualified teachers. These gains reflected genuine learning increases, not changes in student composition.
Competition and pricing effects: Gains were stronger in more competitive areas, and private school fees rose less than expected given quality improvements, due to reduced market power from improved public schools.
Why This Matters
The evidence suggests that public sector education reforms implemented alongside a competitive private sector can produce broader and more equitable gains in student achievement. Policymakers designing public investments in schooling may find that the presence of private schools can amplify the effects of these reforms, benefiting students in both sectors.
Sustaining positive outcomes, however, appears to require consistent policy support and an openness to adapt strategies to local contexts, ensuring that initial improvements are not lost over time. This approach points to the value of fostering a dynamic educational environment where public and private providers both contribute to raising learning outcomes.
Grants to Private Schools: Upping the Ante
Authors: Tahir Andrabi, Jishnu Das, Asim I. Khwaja, Selcuk Ozyurt, and Niharika Singh
Citation: Andrabi, Tahir, Jishnu Das, Asim I. Khwaja, Selcuk Ozyurt, and Niharika Singh. 2020. "Upping the Ante: The Equilibrium Effects of Unconditional Grants to Private Schools." American Economic Review 110 (10): 3315–49.
Questions and Findings
Does providing direct financial grants to private schools in Pakistan improve educational outcomes (such as enrollment, test scores, and school quality)? How do the impacts of these grants differ depending on how many other schools in a village receive them?
Grants raised enrollment—but only in some settings: When a single private school in a village received a grant (“low saturation”), enrollment in that school rose by about 22 students and profits increased, with little effect on test scores or fees.
Quality improved with wider grant coverage: When all private schools in a village received grants (“high saturation”), test scores increased by about 0.15 standard deviations, variable expenditures and fees rose, and schools made more quality-related investments.
Schools adapted strategy based on competition: With more schools receiving grants, competitive pressure led schools to focus on instructional quality and fees, rather than just expanding enrollment.
No significant closures or negative outcomes: The grants did not drive weaker schools out of business—closure rates remained low across all groups.
Why This Matters
This study demonstrates that simply injecting money into schools isn’t always enough—how schools use those resources and the competitive environment they operate in dramatically changes the outcomes. When schools have incentives to compete, they don’t just expand, they also improve quality—leading to higher learning gains.
For policymakers, this means that well-targeted funding, especially in dynamic, competitive local markets, can maximize the benefits of education investment. Crafting policies that both increase resources and foster competition can create a virtuous cycle for student achievement, helping education systems do more with each dollar spent.
A Dime a Day: Private Schooling in Pakistan
Authors: Tahir Andrabi, Jishnu Das, and Asim I. Khwaja
Citation: Andrabi, Tahir, Jishnu Das, and Asim I. Khwaja. 2008. “A Dime a Day: The Possibilities and Limits of Private Schooling in Pakistan.” Comparative Education Review, 52 (3): 329-355.
Questions and Findings
How do private schools in rural Pakistan compare to public schools in terms of quality, affordability, and student demographics? What impact does the growth of private schooling have on education access and equity?
Private schools are widespread and affordable: About 28% of rural villages in Punjab have a private school, with average monthly fees near Rs 100 ($2), making them accessible for many rural households.
Private schools serve diverse, not just wealthy, students: Nearly 40% of private school students are girls; many come from lower-income backgrounds, and 18% of the poorest third use private schools where available.
Distinct teacher workforce and flexible management: Private school teachers are paid about one-fifth as much as public counterparts, are younger, more likely female and local, but have less formal training. Private schools innovate by recruiting locally and responding to parent demand.
Private schools deliver better learning: Students in private schools consistently outperform public school peers on standardized tests, even after accounting for background, though this model relies on a supply of locally educated women as future teachers.
Why This Matters
The rapid spread of low-cost private schools in rural Pakistan upends traditional ideas about access and quality in education. These schools serve a broad spectrum of students—not just the wealthy—and deliver better learning outcomes with fewer resources by responding flexibly to local needs.
This suggests that policy approaches shouldn’t focus solely on expanding public school systems but must also recognize and support the evolving private sector. Understanding how and why private schools succeed can help shape more inclusive policies that improve education for all Pakistani children.
LEAPS Report: Describing Education in Pakistan
Authors: Tahir Andrabi, Jishnu Das, Asim Ijaz Khwaja, Tara Vishwanath and Tristan Zajonc
Citation: Andrabi, Tahir and Jishnu Das and Asim Ijaz Khwaja and Tara Vishwanath and Tristan Zajonc. 2007. “Learning and Educational Achievements in Punjab Schools (LEAPS): Insights to Inform the Education Policy Debate”, Report.
Questions and Findings
How are children in Pakistan getting their education? What are their schooling options? Are the gains in primary school enrollment since the 1990s reflected in learning? What are the largest challenges facing the education system in Pakistan?
Rapid expansion and choice: By 2005, one-third of primary students were in private schools, with private school numbers growing from 32,000 to 47,000—including significant rural expansion and most households having 7–8 schooling options.
Access on the rise, especially for girls: Primary net enrollment increased by 10 percentage points nationally (51% to 61%) from 2001–2005, with the largest gains among rural girls (14 points in Punjab).
Private schools lead in test scores: 42% of primary students now attend low-cost private schools, which consistently outperform government schools in standardized tests.
Learning crisis persists: Despite more children in school, most students remain below curricular standards by Class 3, and persistent challenges—including uneven school quality and weak assessment systems—hinder
Why This Matters
A surge in school enrollment and the rapid expansion of affordable private schools in Pakistan have given families unprecedented options for their children’s education. However, higher enrollment rates have not been matched by improvements in learning, as many students continue to fall below basic achievement levels.
The fact that private schools consistently deliver better learning results—even though they are affordable to many families—suggests untapped potential within the system, but also highlights the limitations of relying on enrollment statistics alone. Addressing deep-rooted challenges in quality, system management, and monitoring is essential to ensure that all children, regardless of school type, acquire meaningful skills and knowledge necessary for future success.