IDSS Presents: 'Upping the Ante: The Equilibrium Effects of Unconditional Grants to Private Schools'


Asim Khwaja
Professor of International Finance and Development and Co-Director of Evidence for Policy Design (EPoD) at the Harvard Kennedy School of Government


Wednesday, March 11, 2015


12–1:30 p.m. PT


RAND Corporation
1776 Main Street
Santa Monica, CA

About the Program

Girls in school in Khyber Pakhtunkhwa, Pakistan

Photo by DFID - UK Department for International Development/CC BY-SA 2.0

Low cost private schooling has been one of the fastest growing sectors in low-income countries. Yet these small "mom-and-pop" schools face significant growth obstacles both in terms of size and quality. Asim Khwaja studied the equilibrium effects of unconditional cash grants to private schools across more than 250 villages and 850 schools in rural Pakistan. Villages were randomly assigned to one of three groups: High intensity (all private schools in village are offered grants), Low intensity (only one private school is randomly selected for a grant offer) and Pure Control (no schools receive offers).

The study found that the level of financing provided in a given village has different implications for effects on enrollment, fees, revenues and test scores. When only one school in the village receives a grant, it sees an increase in revenues that stem from increased enrollment but with no increase in quality or fees. However, when all (private) schools receive grants in the village, schools show increases in revenue primarily through an increase in fees that accompany test score increases.

These findings are consistent with a model of strategic behavior where schools move from more "market stealing" to "market enhancing" strategies when faced with tougher competition. The results inform how the nature of market interactions impacts the partial versus general equilibrium effects of alleviating financial constraints for small-scale entrepreneurs.

About the Speaker

Asim Ijaz Khwaja is the Sumitomo-Foundation for Advanced Studies on International Development Professor of International Finance and Development at the Harvard Kennedy School, and Co-Director of Evidence for Policy Design (EPoD). His areas of interest include economic development, finance, education, political economy, institutions, and contract theory/mechanism design. His research combines extensive fieldwork, rigorous empirical analysis, and microeconomic theory to answer questions that are motivated by and engage with policy. It has been published in the leading economics journals, such as the American Economic Review and the Quarterly Journal of Economics, and he has received coverage in numerous media outlets such as the Economist, NY Times, Washington Post, International Herald Tribune, Al-Jazeera, BBC, and CNN.

His recent work ranges from understanding market failures in emerging financial markets to examining the private education market in low-income countries. He was selected as a Carnegie Scholar in 2009 to pursue research on how religious institutions impact individual beliefs. Khwaja received BS degrees in economics and in mathematics with computer science from MIT and a PhD in economics from Harvard. A Pakistani, UK, and US citizen, he was born in London, lived for eight years in Kano, Nigeria, the next eight in Lahore, Pakistan, and the last eighteen years in Cambridge, Massachusetts. He continues to enjoy interacting with people around the globe.

Khwaja also serves as the faculty co-chair of a week-long executive education program, "Rethinking Financial Inclusion: Smart Design for Policy and Practice," aimed primarily at professionals involved in the design and regulation of financial products and services for low-income populations.

Learn more about the International Development Speaker Series