Education as a Positional Good: The Role of Vouchers

Public Deposited
Resource Type
  • People's satisfaction from some goods and services depends on
    their relative as distinct from their absolute position as
    consumers. Such items are called "positional goods", and a
    restriction of their supply in the situation of general income
    growth is conducive to expenditure escalation as in an arms race.
    If education is a positional good in this sense, arrangements are
    needed that will best prevent such an outcome. The introduction of
    education vouchers of a value egual to the average per capita
    public school expenditure, it is argued, will only hinder not help.
    This is because some recipients will be tempted to obtain more
    education with marginal additions to their vouchers from their own
    pockets. Vouchers are thus welfare reducing because they encourage
    rather than discourage "arms race" situations. Using a formal
    median voter model we show that concerns over possible escalation
    of expenditure will prompt a majority of voters to reject a
    universal voucher system. We examine, as an alternative, a
    selective voucher system that will remove the escalation problem.
    Under this system only low-income families will receive vouchers.
    We demonstrate that the median voter will favor such a selective
    voucher system provided that the voucher-induced increase in
    competition lowers costs and/or improves guality of education.

  • Chen, Z, & West, E.G. (1997). Education as a Positional Good: The Role of Vouchers. Carleton Industrial Organization Research Unit (CIORU). Department of Economics.
Date Created
  • 1997-02-01


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