ISSUES

School Choice Works!The Case of Sweden

by Fredrik Bergström and F. Mikael Sandström

A publication of the Milton & Rose D. Friedman Foundation Volume 1 . Issue 1

School Choicein Thought

About the Authors

Fredrik Bergström received a Ph.D. in economics from theStockholm School of Economics in 1998, and is presentlypresident for the Swedish Research Institute of Trade,Stockholm, Sweden. His research focuses, among othr things,on the role of competition in the private and the publicsectors. Fredrik is, like his co-author, an active participantin the Swedish public debate on school choice.Mikael Sandström received a Ph.D. in economics from theStockholm School of Economics, Stockholm, Sweden. Hisresearch focuses on econometric studies of micro data.Besides the study on the effect of competition on the qualityof schooling, he has also made studies in the field ofenvironmental economics and e-commerce. Sandström is alsoan active participant in the Swedish public debate on schoolchoice, and has recently published a report on how the systemmay be improved.

Table of Contents

Introduction1

Reform in Sweden4

Educational Choice and School Quality5

Positive and Negative Effects of Competition20

Which Competition Effect is the Most Important?23

Other Issues in the Swedish Debate on Educational Choice24

Lessons for the USA26

References37

Endnotes38

The purpose of this paper is to describe the

effectiveness of education reforms carried out

in Sweden and what Americans can learn

from the Swedish experience. We describe

both the development of independent schools

after the reform as well as an empirical study

carried out by us to analyse what effects the

competition has had on municipal schools.

In addition, we briefly review the debate that

has been conducted in Sweden relating

to educational choice reforms.

1

Introduction

I n contrast with the United States, in Sweden almost anyone can set up a school and receive public funding. Pupils and parents are free to choose whichever school they like. This is

probably surprising to many outsiders since Swedenis also known as the countrythat has the Western World’shighest taxation and thelargest public sector, as wellas a country that has hadsocial democratic rule duringall but nine years in the post-war era.

Because of comprehensiveeducation reform undertakenin the early 1990s, Swedenhas become one of the mostpermissive countries in theWestern World with regard toallowing parents to chooseschools freely. In Sweden, primary and secondaryschools have traditionally been the responsibility ofthe municipalities, the lowest tier of government.1

Prior to the 1990s, however, the municipalschools operated under strict national rules andregulations, and received funding from the national

government to cover teacher salaries. (In fact, theteachers were employees of the nationalgovernment, even though they worked in schoolsofficially run by the municipalities.) The schoolsalso had to follow a national curriculum. Only a fewindependent schools2, with special approval from

the government, receivedgovernment funding.

In 1990, the system wasaltered and themunicipalities were givenwider authority over theirown schools. They were alsogiven full financialresponsibility for the schoolsystem.3 In 1992, a schoolchoice reform wasimplemented under which themunicipalities were obliged togive funding to independentschools. Parents were also

given the right to choose which school their childrenattended. The purpose of the reform was to giveindependent schools funding on terms equal tothose of municipal schools.

Independent schools in Sweden must beapproved by the National Agency for Education and

In Sweden almostanyone can set up a school and receive

public funding.Pupils and parentsare free to choosewhichever school

they like.

2

meet certain criteria in order to receive funding.They have to meet the educational standards set upfor the school system and must work in line withthe targets set for the compulsory educationalsystem. They must also be open to admitting allchildren regardless of their ability, religion or ethnicorigin. Last, they are not allowed to charge tuition.

In practice, if these criteria are in place, fewapplications to start schools are turned down by theAgency for Education. It ismore common that a schoolthat has been approved doesnot start due to a lack ofinterest from parents andpupils or the inability to finda suitable locality, rather thanthe application not beingapproved.

The municipalities areallowed to give an opinion onwhether they consider theestablishment of anindependent school to beharmful to existing schools,and the National Agencytakes their views into accountwhen approving or rejectingan application for opening anindependent school. However, the municipalitieshave no veto power, and they are bound by law tofinance an independent school once it has beenapproved. On several occasions, the Agency hasapproved schools against the will of themunicipalities. Among the approved schools areschools owned by teacher or parent co-operatives,non-profit organizations and privately owned firms.

Over the past decade, the number ofindependent schools has increased more than five-fold, and the share of children attending

independent schools has more than quadrupled.The parent-friendly reforms, and the rapid

expansion of independent schools, have initiated awidespread debate in Sweden touching on a numberof issues. How will the pupils be affected by theincreasing competition between schools? Willsegregation be deepened? Will municipal schools beaffected in a negative way? What will happen tounderperforming or special-needs pupils?

The possibility of parentsfreely choosing schools is amuch-debated issue in theUnited States. One importantreason for the hesitancy ofmore states in introducingschool choice is the lack ofknowledge about it. Therefore,the Swedish experienceshould be of interest forseveral reasons. First, itprovides an example ofcomprehensive reform ofschool financing. Sweden hasreplaced an education systemof almost completecentralization with a systemfeaturing a significantfreedom of choice. This has

resulted in a rapid expansion of independentschools. Second, having a reputation as a solidwelfare state, Sweden can hardly be viewed as ahaven of neo-liberal experimentation. Finally, thesystem has been in operation for a decade and thefirst studies evaluating the model are beginning tobe published. So far, the results are encouraging forthose who advocate freedom of choice.

Sweden has replacedan education systemof almost complete

centralization with asystem featuring a

significant freedom ofchoice. This has

resulted in a rapidexpansion of

independent schools.

3

T here were very few private schools in Sweden pre-dating the independent school reform implemented in the

early 1990s. Less than one percent of the pupils attended schools that werenot managed by the State or the municipality.

In other countries in Western Europe, it is morecommon that a large share of pupils attendindependent schools that receive some sort ofgovernment financing. The Netherlands has thelargest share of children in independent schools —approximately 70 percent — which can be explainedby historical circumstances. In the Netherlands, theissue of whether the state or the church shouldhave the main responsibility for the schooling ofchildren was a central and deeply dividing politicalissue during the second half of the 19th century andthe beginning of the 20th century. The matter wasresolved in 1917 through a constitutionalcompromise, which, to this day, results in theNetherlands having a school system with anunmatched number of private schools. According tothe constitution after 1917, the government has anobligation to finance independent schools on termsthat are equivalent to those of the State-runschools.4

Historically, the discussion — not only in theNetherlands but in other countries as well — has

Reform in Sweden

concerned the churches’ ability to run schools.Contrary to the USA, the right of churches to runschools in Europe has often been regarded as a wayto uphold freedom of religion.

It is common in many other Western Europeancountries, as well, that a considerable number ofthe pupils attend various kinds of independentschools. In Denmark, for example, approximately 13percent of the pupils attend independent schools.Danish independent schools are entitled to publicfinancing, though on conditions less favorable thanin Sweden, since grants are not intended to coverthe full costs of education. Parents who put theirchildren in independent schools have to pay a smallfee.

Before the independent school reform wasimplemented in Sweden, there were very fewprivate schools. Some of these schools were bothprivately managed and privately financed — inother words, the parents paid to enter their childrenin these schools — while others received publicsupport. A government decision was necessary forindependent or private schools to receive Statefinancing. Schools that received State financingwere, for instance, the Estonian school, with pupilsfrom the Estonian minority in Sweden. The Jewishschool also received State support, as well as anumber of schools using special pedagogy — for

4

example Steiner/Waldorf schools and Montessorischools — and some Christian schools. Theindependent schools could perhaps best becompared to American charter schools, and served aperipheral role in the school system.

Financing of the school system functionedprincipally as it does in the USA today. Themunicipality decided which school a child wouldattend, and there was little room for the parents tochoose schools. Also, as in theUSA, schools were financedpartly by the municipalgovernment and partly by thenational government.However, the system was evenmore centralized. Teacherswere employed by the nationalgovernment, which also paidtheir salaries, but themunicipal governments ranthe schools under strictnational rules and regulations.

Two legislative changesare significant in order to understand the Swedishreform. The first change in legislation took effect in1991 and transferred responsibility from thenational government to the municipalities,5 makingteachers municipal employees. Instead of payingteacher salaries, the national government grantedmoney to the municipalities on the basis ofdemographic and socio-economic characteristics.The municipalities were also granted moreauthority over the school system. The old andpowerful National Board of Education was replacedby the National Agency for Education, which issupposed to set the goals for the school system,rather than specify how those goals are to be met.Responsibility was decentralized but the publiclyrun school system was intact, even though themunicipalities had the right to provide funding to

independent schools as they chose. However, thefact that school financing was decentralizedprobably made the independent school reformeasier to enact.

The non-socialistic government that came topower in September 1991 made what appeared tobe rather minor changes in the legislation. In twobills to Parliament, the Government Bill onFreedom of Choice and Independent Schools6 and

the Government Bill onSchool Choice7, independentschools were given the rightto receive funding from themunicipalities on termsequal to those of themunicipal schools. The firstbill addressed the compulsoryschool (grundskolan), whichin Sweden is nine years, i.e.primary and lower secondaryschool. The second billaddressed upper-secondaryschooling — “gymnasium,”

roughly equivalent to high school. The laws enactedby Parliament as a result of these two bills cameinto force on July 1, 1992 for primary and lowersecondary schools, and two years later for the uppersecondary schools. Since then, every schoolapproved by the National Agency for Education isentitled to public funding.

The new laws had no effect on the nationalbudget, and no immediate impact on the budgets ofthe municipal governments. The law itself did notestablish any new independent schools. However,the law did transfer the power to allocate resourcesto schools from municipal politicians to parents.

The laws governing the new system werepassed by a non-socialistic government, withopposition from the Social Democrats and the “LeftParty” (former communists). The debate leading up

The new laws had noeffect on the national

budget, and noimmediate impact on

the budgets of themunicipal

governments.

5

to the launching of a voucher system was largelyinitiated by the “Moderate Party” — conservatives,especially its youth wing. In fact, the first time thatvouchers were mentioned in the SwedishParliament, in 1982, was by Member of ParliamentGunnar Hökmark, then leader of the ModerateYouth Federation. When the Social Democratsreturned to power in 1994, however, they did notreverse the reforms. Today, while there are certainlydifferences of opinion onvarious aspects of the system,of the seven parties inParliament only the “LeftParty,” with around 10percent of the popular vote, isopposed outright to freedom ofchoice and the right ofindependent schools to receivepublic funding.

The regulationsconcerning grants toindependent schools givemunicipal and independentschools equal economicconditions.8 The NationalAgency for Education mustapprove all schools that fulfillcertain obligations. Theschools must operate inaccordance with the nationalcurriculum and may not havediscriminatory rules ofadmission. Furthermore,independent schools are not allowed to charge aschool fee.

Apart from these demands, there are fewlimitations for the operation of an independentschool. Moreover, religious communities are allowedto manage schools on the same conditions ascompanies and other organizations. The municipal

governments are entitled to give their opinion on anindependent school applying for approval but theydo not have the right of veto against the establish-ment of independent schools. The National Agencyfor Education may, however, declare that a schoolwhich is deemed to fulfill all criteria for approvalwill still not have the right to receive funding if thiswould have a “tenable” negative influence on themunicipality’s school system. The children and their

parents are entitled to choosefreely between municipal andindependent schools.

As pointed out above, fewapplications to start schoolsare turned down by theAgency for Education. Of theapplications submitted duringthe year 2000 to startprimary or lower secondaryschools (“grundskolor,” 1-9grades), 125 were approvedand only 13 were rejected. Anadditional 47 applicationswere withdrawn. Reasons forrejection were that anapplication was incomplete,that the applicant was notconsidered to be sufficientlyviable to be able to run aschool, or that, in the opinionof the Agency, the schoolwould not have been able togive the pupils education at

an appropriate level. Two of the approved schoolswere not given the right to receive funding, as theagency deemed that that would cause “tenable”negative consequences for the school system in themunicipalities concerned.9

The Swedish legislation is consideredprogressive from an international point of view as

The financing reformhas triggered an

impressive surge inthe development of

independent schools.The number of pupils

attendingindependent schoolshas quadrupled and

the number ofindependent schoolshas increased more

than fivefold.

6

well. Apart from the Netherlands, establishing anindependent school is probably easier in Swedenthan in any other country.

Independent Schools AttendanceQuadruples with Choice

The financing reform has triggered animpressive surge in the development of independentschools. The number of pupils attendingindependent schools has quadrupled and thenumber of independent schools has increased morethan fivefold (see Diagram 1, below).

In the 1992-93 school year, there were 106independent primary and lower secondary schoolsand 16 upper secondary schools. Today, thecorresponding numbers are 488 and 149. Thegrowth continues, even though the rate of growthmay have slowed somewhat, since the number ofapplications to start new schools declined this yearcompared to last year. This is partly due to newrules and legislation that put somewhat morestringent conditions on the approval of new schoolsand higher requirements on teachers and localities.

The number of applications is still impressive. Intotal, the National Agency for Education received316 applications to start new schools for the 2003-04 scholastic year. During the past couple of years,around two-thirds of all applications have beenapproved,10 and of those approved, around halfactually got started. Extrapolating from thesefigures, Sweden would thus see the establishmentof more than 100 new independent schools next year.

It is worth emphasizing, that independentschools still constitute a small share of the totalnumber of schools, which is around 6,000.Compared to other countries, the share of pupilsattending independent schools in Sweden is alsosmall: approximately four percent of the primaryschool children and 5.6 percent of the uppersecondary school pupils.

While the average certainly hides considerabledifferences between municipalities (the independentschool share is zero in 74 of Sweden’s 289municipalities), independent schools have beenestablished in all regions of the country, and in bothrural and urban areas. Three of Sweden’s northern-most municipalities, at or above the Arctic Circle inthe rural and sparsely populated County of

Diagram 1 — The Development of Independent Schools

250

500

92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02Independent schools(primary, lower secondary) Independent schools(upper secondary)

6

5

4

3%

2

1

0Independent schools(upper secondary)

0

150

7

Norrbotten, are among the municipalities with thelargest share of students in independent schools,close to 10 percent. Judging from the last round ofapplications to start new schools, it appears that,while the rate of growth in the number ofindependent schools may have slowed somewhat inthe major urban areas, it is undiminished in therest of the country.

While it is clearly wrong to conclude thatindependent schools are mainly urban phenomena,it is in and around Stockholm, Sweden’s capital andlargest city, and Gothenburg, the second largestcity, that the expansion has been most rapid. Täby,a suburb of Stockholm, has the largest share ofstudents in independent primary and lowersecondary schools (over a fifth – 22.2 percent), whilethe neighboring municipality, Danderyd, has thelargest share of secondary school students inindependent schools (almost a third – 32.1 percent).

It is perhaps not surprising that manyindependent schools have been established in Täbyand Danderyd; both are affluent municipalities,

with municipal governments that activelyencourage independent schools. More remarkable,however, is that independent schools have alsoexpanded rapidly in some less privileged areas. Thefourth largest share of students in independentprimary and secondary schools is found in themunicipality of Älvkarleby, which is a mainly rural,working-class community. Several municipalitieswith large immigrant populations are also amongthose with a comparatively high proportion ofindependent schools. Botkyrka, which has thehighest proportion of foreign nationals in theStockholm region, and which is characterized byhigh unemployment and serious social problems,has the sixth highest proportion of students inindependent schools in the country. Almost 13percent of the primary and lower secondarystudents there attend independent schools.11

An important difference between the Swedishindependent schools and independent schools inmany other countries is that “confessional schools”play a minor part. “Confessional schools,” or schools

Diagram 2 — Development of Independent Schools According to Specialization

Source of data: The National Agency for Education

200

450

94/95 95/96 96/97 97/98 98/99 99/00 00/01Special pedagogy General Religious Other

Num

ber

of s

choo

ls

150100

0

8

run by a religious organization (hereafter referredto as “religious schools” in this paper), account for asmall (14 percent) and shrinking share of the totalnumber of independent schools (see Diagram 2,previous page). In the Netherlands, to the contrary,the majority of the non-municipal schools areoperated by the country’s churches, and in the USA,parochial schools and other schools run by churchesand other religious organizations account for thevast majority of independent schools. In Sweden, itis instead mainly the number of schools withspecialization that is increasing. The great majorityof independent schools are specialized and/orpedagogy-based, such as Steiner/Waldorf andMontessori schools.

Another distinctive feature of the Swedishmodel for school financing is that there are noformal limitations on how the schools should beowned and managed. In Denmark, private orindependent schools must have a board with aparent majority. The schools also have to beindependent, which in practice means that asuccessful school cannot open another school. Bycontrast, in Sweden, corporations are not onlyallowed to run independent schools, they areactually the most common form of ownership.Corporations run 30 percent of independent schools.These companies are also allowed to yield a profit.12

Some companies run a large number of schools andthey are rapidly expanding.

... [I]n Sweden,corporations are notonly allowed to run

independent schools,they are actually themost common form of

ownership.Corporations run 30

percent of independentschools. These

companies are alsoallowed to yield a

profit. Some companiesrun a large number ofschools and they arerapidly expanding.

9

S weden’s education finance reform hasled to a transition from a highlycentralized school system to a systemwhere schools have to compete forpupils to receive funding. One of the

most important arguments of voucher opponents, inSweden as well as in the USA, has been that themunicipal or state-run school would be depleted ifsubject to competition from independent or privateschools. It has been said that the best students andteachers would transfer to independent/privateschools, which would be of negative consequence forthe quality in the municipal/state-run schools. ASocial Democratic former Minister for Education,Carl Tham, writes that

(t)here is inevitably a conflict betweenfreedom of choice and a good school foreverybody.13 [Our translation]

On the other hand, defenders of freedom ofchoice have claimed that competition fromindependent schools would have a positive effect onmunicipal schools.

Since it was, on a theoretical plane, uncertainwhether an increased element of competition wouldaffect the quality of the education in schools, we, as

Educational Choice and School Quality

well as other researchers, have taken a closer lookat this matter. The studies are briefly summarizedbelow.

The Competition Effect

The studies that we have carried out in Swedenare of special interest because the Swedish schoolsystem probably allows the most freedom of choicefor pupils and parents in the world. It is also ofinterest from a methodological perspective, as thedesign of the Swedish school system allows a highlevel of competition between schools and becausethe school capitation allowance system makes itrelatively easy to set up independent schools. This,coupled with the fact that the number ofindependent schools has soared during the 1990s,renders it possible to evaluate the educationaleffects of increased freedom of choice.

In other words, the Swedish example canindicate what would happen if a country, forexample the USA, introduced more freedom ofchoice for students and parents and thus morecompetition between schools.

... [T]he Swedishexample can indicatewhat would happen

if a country, forexample the USA,introduced more

freedom of choice forstudents and parents

and thus morecompetition between

schools.

10

Positive and negative effects ofcompetition

Competition can affect quality and efficiencyonly if the school management, in order to respondto competition, chooses to organize the educationmore efficiently and seek higher performance levels.Lack of competition might cause so-called “x-inefficiency.” This expression means that anorganization — a company, anauthority or a school — doesnot reach the best possibleresult given the resourcecontribution; in other words,that resources are not used inthe best possible way.14

Many people reject thenotion that the municipalschool is inefficient, parti-cularly those working in thatsector and those who are of theopinion that they can scarcelywork any harder than theyalready do.

The cause of x-inefficiencyis not necessarily that theemployees are not workinghard enough. It is rather thelack of pressure for changethat keeps the employees busydoing the wrong things. Everyone in theorganization is working hard but, due to poororganization, the result is not as good as it could be.Competition means both that this type ofinefficiency becomes more evident — becausecomparisons can be made with other organizations— and that it becomes possible to learn from otherorganizations and thus implement improvements.

In all competitive processes, experimentation isan important component. By imitating successful

operators and by learning from the mistakes thatare the result of less successful attempts,experimenting can contribute to an increase of theaverage quality of education.

Competition can also affect factors such as totalschool hours and family-specific factors, or lead toreprioritization of how many lessons are offered fordifferent subjects in the municipal school. Regard-ing family-specific factors, it is possible for the

municipal school to follow theindependent schools’ exampleand choose to involve parentsmore in their children’seducation, thus activatingthe “home curriculum.”

Another effect of thecompetition could be thatteachers would receivehigher wages. Becausemunicipal schools are sodominant, it is often difficultfor teachers to changeemployers. In many cases theonly alternative is to work inanother municipality, whicheither means a longercommute or that a teacher isforced to move. Through theestablishment of schools withother constituents, the

competition for teachers also can lead to bothincreased wage scattering and a higher wage levelin general. Wage scattering can serve as anincentive for individual teachers to work harder,while in the long term the higher wage levelattracts competent individuals to the profession.15

From a short-term perspective, however, higherwages could be an economic burden for individualschools.

If the municipalitydoes not cut down on

administration,premise and otheroverhead costs, thiswill have a negativeeffect on the grants

for pedagogicmaterials andteacher pay.

11

One significant result of competition forcompanies in different lines of business — andprobably for schools as well — is that a selectioneffect leads to an upgrade of the averageproductivity in the trade in which the companyworks. In a competitive environment, new operatorsenter while other less competitive companies areforced to exit the market.16

A potential problem with allowing competition,either from other municipal schools or fromindependent schools, is thatthe quality of the education insome schools might decline ifthe best pupils choose themore competitive schools. Ithas not been established thatcompetition has this effect,but the risk exists becausechildren with devoted parentstend to be more successful inschool, and devoted parentsare probably also moreinclined to make an activechoice of schools. If certainschools lose a large group ofscholastically motivatedpupils, it can be of negativeconsequence for two reasons.First, there is a risk that theshare of resource-exactingpupils would grow while it is not certain that theresource allocation would increase proportionately.(Whether that happens depends on how themunicipal remuneration system works.) Second,scholastically motivated pupils can have a positiveinfluence on other pupils. If the scholasticallymotivated students disappear, then this positiveeffect disappears as well.

Similarly, the best teachers might choose to goover to competing schools if offered better working

conditions. This is not a necessary result ofincreased competition; it depends mainly on howthe municipal schools react to the new situation.But the risk that competent teachers will find newschools does exist, and the risk would perhaps beparticularly great if negative effects ensue as aresult of a decrease of the share of scholasticallymotivated pupils in a particular school.

Both potential problems mentioned above mightbecome particularly serious if the municipality does

not manage to adjust its coststo the new competitivesituation. If independentschools are established, thenumber of pupils inmunicipal schools willdiminish, unless the pupilpopulation increases. If themunicipality does not cutdown on administration,premise and other overheadcosts, this will have anegative effect on the grantsfor pedagogic materials andteacher pay. These possiblenegative effects have alsobeen one of the mostimportant arguments for theminority fraction within theSocial Democratic Party that

is opposed to the school choice reform. In a debatein one of Sweden’s leading newspapers, a number ofSocial Democratic politicians — Parliamentariansand leading municipal politicians — it was said that“[w]hen the municipality is forced to give out moneyto new primary and secondary schools underprivate management, the possibilities to improvethe municipal school decrease. Less money meansfewer teachers, poorer premises and older books.”17

[Our translation.]

... [N]o study hassucceeded in showingthat the net effect ofcompetition could benegative, and recent

studies that havetaken the earlier

criticism intoconsideration still

seem to indicate thatcompetition has apositive net effect.

12

In summary, we can establish that there areboth positive and negative effects of competition;which ones dominate will be discussed in the nextsection.

Which competition effect is the mostimportant?

Internationally, there are a number of empiricalstudies that have investigated whether independentor private schools reach betterresults than publicly ownedschools, and the effects thatstem from increasedcompetition between privateschools and state or municipalschools. Most of those studiesdiscuss American conditions.

The research oneducational results in schoolswith different types ofconstituents was initiatedthrough studies that showedthat Catholic schools in theUSA often reached betterresults than the municipalschools. But these studieshave been criticized. The mostsignificant objection has beenthat the pupil population isnot comparable in these twokinds of schools. The betterresults of the Catholic schools, according to thecritics, may just as well be owing to the fact thatpupils with better qualifications tend to go to theseschools. But several studies that have taken thiscriticism into consideration have reached similarresults. The research thus indicates that privateand independent schools can reach better

educational results than public schools.Some of the most interesting studies in this

field are about the so-called “Milwaukeeexperiment,” in which children of low-incomeearners could apply for a school voucher.18 A numberof school vouchers were distributed by lotteryamong the applicants. Owing to this design, therewas an automatic control group who remained inordinary municipal schools. Several studies of thescholastic results showed that the pupils in privateschools achieved better results.

Other studies focus onthe effects of competition onthe publicly managedschools.19 These studiesgenerally seem to indicatethat the positive effects ofcompetition are greater thanthe negative effects — that isto say that the net effect ofcompetition is positive.However, some of the studiesthat have come to thisconclusion have beencriticized because the resultsare not robust. In otherwords, with minor changes ofthe assumptions behind themodel, the results are nolonger statisticallysignificant. Nevertheless, nostudy has succeeded inshowing that the net effect of

competition could be negative, and recent studiesthat have taken the earlier criticism intoconsideration still seem to indicate that competitionhas a positive net effect.

Our study of the effects of competition on thepublic schools arrived at a similar conclusion —that freedom of choice and competition appear to

None of our resultsindicated that thecompetition from

independent schoolshad had a damagingeffect on municipal

schools.

13

have a positive effect on the quality of education inpublic schools.20 In order to examine therelationships, we used data containing informationon approximately 28,000 pupils in the ninth gradeat both independent and municipal schools. Thematerial contained pupils’ grades and the results onthe national compulsory test in mathematics,English and Swedish, given to all ninth graders.

To be able to study how an individual factor —in our case, the degree ofcompetition from independentschools — affects theacademic results of thestudents, it was important totake into consideration otherfactors that could have suchan effect as well. It could, forinstance, be the case thatpupils in municipalities densein independent schools hadparents with higher educationthan the national average. Ifwe have come to theconclusion that municipal schools have a bettersuccess ratio in municipalities with a large share ofindependent schools, it could be that this fact is“shining through,” as children of well-educatedparents are often more successful in school. Tominimize the risk of coming to the wrongconclusions, we took into consideration the parents’education and income, if the pupil had animmigrant background, how large the school was,and the school’s financial resources measured asmunicipal spending per pupil. In addition to this,we took into consideration that there might bedifferences between metropolitan municipalitiesand sparsely populated rural districts.

Adding to the challenge of this study was thefact that knowledge is difficult to measure. Hence,there was a risk that an analysis of pupil results

would become misleading if a too-narrowmeasurement were used. In order to avoid thisproblem to the extent possible, we used severaldifferent result measurements. We studied theeffects on the final grade in the subjects ofmathematics, English and Swedish; if the pupil hadbeen failed in any subject; the results of thedifferent parts of the national compulsory test inmathematics and the so-called “credit value.” The

latter is a total appraisal ofall the final grades andconstitutes the score that isused for admission to theupper secondary school.

None of our resultsindicated that the competitionfrom independent schools hadhad a damaging effect onmunicipal schools. To thecontrary, we found support forour conclusion that themunicipal school improvesthrough competition. In all

cases, the results in the municipal schools werebetter the larger the share of pupils attendingindependent schools. For more than half of theresult measurements, the effect was statisticallysignificant.

Since our first study we have carried outfurther analyses, as important criticisms of thestudy were made on two points. First, it was saidthat we had not thoroughly taken into considerationthat the establishment of independent schoolsmight be affected by how well the municipal schoolfunctions. Second, some critics claimed that we hadnot sufficiently examined if the results were“robust;” in other words, if they would change ifsmall alterations were made in the model.

The first problem was solved through a specialstudy of what is causing the establishment and

14

growth of independent schools in somemunicipalities but not in others. The informationthat emerged coincides with previous Americanstudies as well. It seems as if independent schoolsto some extent grow faster if educational results ofthe pupils in the municipal school — after otherfactors have been tested for — are not good enough.There are also other important factors; for instance,if the population and the municipality have apositive attitude towards private alternatives.

We have addressed the question of whether theresults are “robust” or not by making different typesof changes to the model used — for instance, byexcluding variables or observations or replacingmissing data according to different principles. Intotal we have tested more than 20,000 differentvariations of our model without finding any reasonto change our conclusions.

In summary, we can establish that in all theresearch carried out on how competition affects thequality of education, there are no studies indicatinga negative correlation. The recurring tendencyinstead is that competition contributes to a positivedevelopment of the school. This is a valid conclusionfor both Sweden as well as the USA.

15

T he debate in Sweden on independentschools is very similar to the debatethat has been conducted in the USA.However, in Sweden the debate haschanged considerably after the

introduction of independent school financing reformin 1992. Of the seven parties that are representedin the Swedish parliament, only one party wants toabolish the present system of financing independentschools. This is the Left Party, the formerCommunist Party, with around 10 percent of thepopular vote. Yet, mainly within the ruling SocialDemocrat Party, there is also a large minority thatis opposed to the independent school system, notleast among politicians on a municipal level.

A common argument in the American debate —an argument that is seldom heard in the Swedishdebate nowadays — is that a school voucher systemwould result in tax revenue being used to pay forprivate schools for children with rich parents. Inpractice there is very little to indicate that childrenof high-income earners would choose independentschools to a greater extent than low-income earners.

On the contrary, the school voucher system hasrendered it possible for large groups in society toenjoy the same freedom of choice that washeretofore granted only to a few. For one thing, itturns out that many immigrants as Sweden-borncitizens choose to place their children inindependent schools.

Teachers and Sweden’s Reforms

Another interesting difference between thedebates in the USA and Sweden is that the Swedishteachers’ trade unions have not been opponents offreedom of choice. There are certainly differentopinions within the teaching profession, but theteachers’ two main trade unions on the wholesupport the present legislation and have membersthat work both at municipal schools and atindependent schools.

One reason for the support from the tradeunions may be that teachers working inindependent schools seem to be more satisfied with

Other Issues in the SwedishDebate on Educational Choice

One reason for thesupport from the

trade unions may bethat teachers working

in independentschools seem to be

more satisfied withtheir work situation

than teachers inmunicipal schools.

16

their work situation than teachers in municipalschools. The Swedish Employers Confederation(now the Confederation of Swedish Enterprise,Svenskt Näringsliv) commissioned a poll amongteachers who had left the municipal schools to workin independent schools. It showed that, even thougharound half of the respondents stated that the paceof work was faster in the independent schools (mostof the remainder stated that the pace of work wasthe same), more than 70percent stated that workingconditions were better in theindependent schools than inthe municipal schools. Morethan half stated that workingconditions were much better.Only one in 20 stated thatworking conditions wereworse. A number of positivechanges were noted amongteachers who had moved froma municipal school to anindependent school. Theystated that they had morecontrol over their own workand that they received moreencouragement. Theindependent schools wereconsidered to be better at responding positively toinitiatives by the teachers and to have better schoolmanagement. Also, positive contact betweenteachers and parents was considered better in theindependent schools by a majority of the teachers.

The tendency in Sweden for employees to findthat moving from the public sector to private firmsimproves their working conditions is noted not onlyin the school sector. An important trend in the lastcouple of decades has been that municipalitiescontract out some of their responsibilities. Insteadof using municipal employees to perform road and

city parks maintenance, for example, they contractprivate firms to do these jobs. Also, responsibilitiessuch as care for the elderly and physically disabledhave in many instances been contracted out toprivate firms. Within the Swedish system ofsocialized health care — health care for all citizensis almost entirely financed via the tax bill —contracting is also used to a considerable extent. Anumber of hospitals have been privatized, as well as

primary health care centers,even though the governmentstill pays most of the cost.One of the main opponents ofthis development has beenthe trade union organizingblue-collar workers in thissector — the SwedishMunicipal Workers’ Union.However, the union hasrecently reversed its position.One reason for this is thatmany of their members seemto prefer their new, privateemployers. At least two pollscommissioned by this unionfound that membersemployed by privatecompanies ranked their

employers higher than those working formunicipalities.

A possible reason for the disparity between theattitudes of the Swedish and American teachers’unions is that unionization in Sweden is ratherhigh in most sectors of the economy. Americanteachers may fear that unionization would be lowerin independent schools than in the present unifiedsystem. A similar concern seems far-fetched inSweden for the above reason.

Another important argument in the debate onfreedom of choice in the scholastic field is that it

There is no evidencethat freedom of choicewould actually lead toincreased segregation.

17

leads to increased segregation. Even though thedebate in Sweden is, in its fundamental features,similar to the debate in the USA, it is different onsome points due to dissimilar ethnic structures inthe populations of the two countries.

Historically, Sweden has been ethnicallyhomogenous to a greater extent than most otherEuropean countries. There have been some distinctminorities, mainly Sami and Romanies, in Sweden,but these are very small. For a historical reason —Sweden and Finland were parts of the same countryuntil 1809 — there hasalways been a considerableFinnish-speaking minority inSweden. This is partly aresult of migration and partlydue to the fact that the borderbetween the Swedish- and theFinnish-speaking areas doesnot coincide with the nationalborder. The Finnish-speaking minority is, however,on the whole well integrated into Swedish society.

Throughout the history of Sweden, other typesof immigration have taken place as well. In theMiddle Ages, for instance, Germans had a dominantposition in Stockholm and some other cities. DuringSweden’s period as a great power in the 17thcentury, and also later on, there was a considerableimmigration of blacksmiths and other craftsmen aswell as merchants from, among other places, theprovince of Walloon in today’s Belgium, Germanyand the Netherlands. During and after the SecondWorld War, Sweden received a considerable numberof refugees from the three Baltic States: Estonia,Latvia and Lithuania. These countries wereoccupied by Nazi Germany and the Soviet Unionsuccessively and remained under Soviet dominationuntil 1991. However, all these immigrants havebecome almost completely integrated. Althoughsome of the Baltic immigrants have kept the ties to

their native countries, and in some cases evenmoved back when these countries regained theirindependence, it is difficult to consider any of thesegroups as distinct minorities.

Instead it is the immigration that has takenplace during the last two or three decades that hasresulted in pockets of less-integrated populations inSweden. The immigrants have originated from alarge number of countries both in and outside ofEurope. The immigration has consisted partly offoreign labor and partly of refugees, and some

immigrant groups have notintegrated into the Swedishsociety. Especially around thecountry’s major cities, thereare areas with a large shareof immigrants that arestruggling with addictionissues, high unemploymentand other social problems.

The Swedish segregation discussion has focusedon the situation of the immigrants as well as onclass distinctions. People have claimed that freedomof choice would make inhabitants in areas with alarge number of immigrants even more isolatedfrom the rest of the population and that it couldlead to segregation along lines of parents’educational backgrounds and economic situations.

There is no evidence that freedom of choicewould actually lead to increased segregation. Onthe other hand, there is little evidence to thecontrary. No deeper analyses exist of what effectsthe freedom of choice reforms have had in this field.Instead, anecdotal support for different points ofview has been presented in the debate.

Those who claim that segregation is increasingrefer to statistics allegedly showing a disparity inquality between independent schools and those,mainly in the Stockholm region, having highnumbers of pupils with immigrant background

18

The important issueis actually not iffreedom of choice

results in segregation,but, first, if it leads to

detrimentalsegregation; and

second, if segregationwould be greater with

freedom of choicethan in a centrallycontrolled system.

whose parents have low education or low incomes.Those who claim the opposite refer to the fact thatthe share of pupils from suburbs with manyimmigrant inhabitants and with considerable socialproblems has increased in the popular schools inthe center of the city.21

The Swedish debate is somewhat confusing dueto the fact that it is not completely clear which typeof segregation is being referred to. If, bysegregation, we mean thatpupils attending differentsorts of schools will besystematically differentiated,then it is almost natural thatfreedom of choice would leadto one type of segregation.Muslims will attend Muslimindependent schools to alarger extent than Christianchildren, and vice versa. It islikely that children withSpanish-speaking parents willchoose schools with a Spanishlanguage profile to a greaterextent. That is actually thepoint of freedom of choice. Wedo want children and parentsto be able to choose the schoolthat is suitable for them. Insuch a case, it is not a problemthat different people choosedifferent schools. Nor will people make the choicesthat politicians, researchers and public debatersbelieve they should. Whether or not the preferencesof parents should prevail over the preferences ofpoliticians is obviously a matter of ideology.

The important issue is actually not if freedom ofchoice results in segregation, but, first, if it leads todetrimental segregation; and second, if segregation

would be greater with freedom of choice than in acentrally controlled system.

Segregation can be detrimental to bothindividuals and to the society. There are manyindications that the integration policy of the pastdecade has failed. We have large groups of Swedeswith immigrant backgrounds who do not feel thatthey are a part of the Swedish society. There areareas, mainly metropolitan, where a large share of

the inhabitants areimmigrants and where theincomes are low, theunemployment high and thesocial problems considerable.Those living in these areasoften find it difficult toresolve their isolation. Theisolation creates tensionbetween different groups anddamages the unity in thesociety.

Segregation in Sweden’seducational system is aconsequence of the housingbeing highly segregated and,in this matter, there is anobvious similarity to theAmerican situation. Schoolsin the USA are to someextent segregated due to thefact that different population

groups are concentrated in different areas; this isalso the case in Sweden. Since immigrants, low-income earners and people with a low level ofeducation are to a larger extent living in certainareas, these groups are also concentrated in theschools located in these areas.

This in turn means that the schools in Sweden,as well as in the USA, would be segregated no

19

A governmentcommittee makes thefollowing statement:“In the debate, the

view thatindependent schoolsare segregated, anddo not have studentswith special needs is

sometimes heard.None of the

committee’s findingsindicate that

independent schoolshave fewer studentswith special needs

than domunicipal schools.”

matter how we designed the educational system. Itmeans also that we cannot compare the presentsituation to an ideal image where segregation is nota problem at all. We must instead compare thesystem that we have today with possiblealternatives.

One alternative for today’sfreedom of choice system wouldbe to revert to the “proximityprinciple,” which was in forcebefore. According to thisprinciple, children mainlyattend the schools that aresituated closest to their homes.The local education authoritydraws a boundary line on themap between the schools’catchment areas and thechildren attend the school thatthey are allocated. If thehousing is segregated, theschools will be segregated aswell. Thus, it is not certainthat we would have lesssegregation with the proximityprinciple.

The type of freedom ofchoice that existed in Swedenbefore the independent schoolreform — and which is themost important form offreedom of choice in the USA— is, furthermore, extremelyunequal. With this system,there were two ways to chooseschools. The wealthy had theoption of choosing a completelyprivate school where the parents paid the whole fee.But there was also the possibility of choosing

schools by choosing neighborhoods. It is difficult toimagine a system more efficient in giving freedom ofchoice to the rich but not to the poor. Wealthypersons can easily take up residence in affluentmunicipalities with good schools, while the poor are

forced to settle where theycan afford, for instance incities or suburbs with manysocial problems and poorschools.

We should not forget inthis discussion that perhapsthe most important counterto segregation is the moralargument that all childrendeserve a good education.Having a school that doesnot teach children how toread, write and countproperly is a sure method tocreate isolation.

A related concern is thatthe independent schools mayexclude students with specialneeds, such as physicaldisabilities or limitedSwedish proficiency, etc.There is, however, noevidence that this is thecase. A governmentcommittee, appointed by thesocial democraticgovernment to evaluate someaspects of the reforms,makes the followingstatement:

In the debate, the viewthat independent schools are segregated, and do nothave students with special needs is sometimes

20

heard. None of the committee’s findings indicatesthat independent schools have fewer students withspecial needs than do municipal schools. To thecontrary, many independent schools have manystudents from this category. Parents that do notconsider that their children get the support theyrequire in the municipal school often take theirchildren from the municipal school to anindependent school.22 [Our translation.]

The committee also notes that a number ofindependent schools are explicitly focused onstudents with special needs.

The issue of whether it is appropriate forschools based on religious foundations to receivesupport through public funds has also been debatedin Sweden, but has not figured as prominently as inthe USA. An important reason for this might bethat the religious schools constitute such a minorshare of the independent schools — less than 15percent (see Diagram 2, Page 7). There are noimpediments for religious organizations to manageschools, and, as previously noted, there are Jewishand Muslim independent schools as well as schoolsrun by various Christian denominations. Thecurriculum, which all schools must follow, doesestablish certain regulations; for example, that theeducation must be based on respect for the equalworth of all human beings. The National Agency forEducation has investigated a number of Christianindependent schools and has in general found thiscondition fulfilled. The criticism of religiousindependent schools has, if anything, been mainlyabout not fulfilling certain quality demands, forexample, the competency level of teachers.

21

T he Swedish reality is certainlysomewhat different from that of theUSA, but there are a number ofgeneral lessons that can be shared.One important difference is that it is

not mainly the religious schools that haveexpanded. It is not certain that the development inthe USA would follow the Swedish pattern, butthere are indications that in Sweden it is mainlynon-religious schools that are favored by a schoolvoucher system.

This is actually not so remarkable.Before the Swedish freedom of choice reform wasimplemented, parents who wanted to choose acertain school for their children were forced to paytwice for the education. They paid taxes for themunicipal education system, as well as the fee tothe private schools their children were attending.Furthermore, religious organizations often had thepossibility of subsidizing the term fees by usingvoluntary work or donations. Under thesecircumstances, it was only parents who verystrongly preferred a private school to a municipalwho chose the private alternative.

It is perhaps not remarkable that mainlyparents with strong religious beliefs choose privateschools in such cases. Through a school voucher

Lessons for the USA

system, schooling becomes a more normal market,where different schools compete through the qualityof the education by offering special subjects orfocusing on children with special needs. Religiousschools will certainly continue to exist, but themarket to which they appeal is limited.

The Swedish reforms also show that it ispossible to unite local influence on the educationalsystem with considerable freedom of choice. InSweden, as well as in the USA, the localgovernment has a great responsibility for theeducational system. Financing comes both fromlocal taxes and from contributions by the nationalgovernment. The main element in the Swedishreform is that the national legislation forces thelocal governments to treat their own schools andindependent schools alike.

Also, it would be silly to claim that Sweden issubject to a radical libertarian experiment. Thechanges in the system for school financing have notaltered the fact that schools are entirely financed bypublic funds. The role of government in Sweden islarger than in practically any other country. Theratio of public expenditure to GNP is 52.9 percent,highest of all OECD countries. The employers’ tax,paid by the employers on all wage payments, isaround 40 percent. The income tax for low- and

22

middle-income earners is around 30 percent,depending on municipality of residence. The highestmarginal income tax is over 55 percent. In addition,most goods consumers buy are subject to a value-added tax (roughly similar to a sales tax) equal to25 percent. Swedes have public retirement benefitsand almost free health-care.

It should also be clear that teachers have noreason to fear school vouchers. To the contrary,when the choice of employer is not only betweendifferent municipalities but also between severalindependent schools, this seems to benefit teachers.Also, the working conditions in the independentschools appear to be superior to those in themunicipal schools. This may be due to a lessbureaucratic structure of the former.

Further, there is no evidence that lessprivileged students are disfavored by school choice.Rather, many independent schools cater to studentswith special needs. Also, children with immigrantbackgrounds choose independent schools to a largerdegree than do other students.

The main lesson to be learned from the Swedishreforms is that school choice works. Sweden has leftbehind an almost completely centralized system,with tight national control of schooling and aminiscule role for non-government institutions. Thenumber of students in independent schools hasmore than quadrupled over a decade, and thenumber of independent schools has increased morethan five-fold. Yet no one has been able to show thatthis has had any negative consequences for thepublic schools. On the contrary, all evidence to dateindicates that the public schools have improved dueto competition.

The main lesson to belearned from the

Swedish reforms isthat school choice

works. Sweden hasleft behind an almost

completelycentralized system,with tight nationalcontrol of schoolingand a miniscule rolefor non-government

institutions.

23

Arum, R. (1996) “Do private schools force publicschools to compete?” American SociologicalReview, Vol 61, No 1, 29-46.

Bergström, Fredrik & Sandström, F. Mikael (2001)Konkurrens bildar skola – en ESO-rapport omfriskolornas betydelse fˆr de kommunalaskolorna. “Report to the Expert Group on PublicFinance, Swedish Ministry of Finance.” (InSwedish with English summary.) Ds 2001:12.Stockholm: Finansdepartementet.

Caves, R.E., (1998) “Industrial organization andnew findings on the turnover and mobility offirms.” Journal of Economic Literature.36:4:1947-82.

Couch, Jim F., Shughart, William F. II & Williams,Al L. (1993) “Private school enrollment andpublic school performance.” Public Choice.76:301–312.

Dee, T. S., (1998) “Competition and the quality ofpublic schools.” Economics of Education Review.17:4:419–427.

References

Goodman, John C. and Fritz E. Steiger, eds. (2001)An Education Agenda: Let Parents Choose TheirChildren’s School. Dallas, Texas: National Centerfor Policy Analysis.

Greene, Jay P., Peterson, Paul E. & Du, Jiangtao(1999) “Effectiveness of school choice. TheMilwaukee experiment.” Education and UrbanSociety. 31(2)190–213.

Hoxby, Caroline Minter (1994) “Do Private SchoolsProvide Competition For Public Schools?”National Bureau of Economic Research WorkingPaper, No. 4978, Washington, D.C.: NBER.

Hoxby, Caroline Minter (2000) “Does CompetitionAmong Public Schools Benefit Students andTaxpayers?” American Economic Review.90:5:1209–1238.

“Kommunernas yttranden om fristående skolor.”(Nov. 2001) Skolverket. Dnr 2001:3925. (Reportfrom the National Agency for Education on themunicipalities statement to the Agency onapplications to start independent schools.)

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Leibenstein, H. (1966) “Allocative efficiency vs. ‘x-efficiency.’ ” American Economic Review.56:3:392-415.

Mueller, Dennis C. (1989) Public Choice II.Cambridge, UK, New York and Melbourne:Cambridge University Press.

“Netherlands, The. The Kingdom of theNetherlands (1814–1818).” EncyclopœdiaBritannica. <http://www.britannica.combcomebarticle20,5716,115642+18+108757,00.html>(Accessed: 29 January 2001).

Newmark, Craig M (1995) “Another look at whetherprivate schools influence public school quality:Comment.” Public Choice. 82:367–373.

“Proposition om valfrihet och fristående skolor.”(Prop. 1991/92:95.) (Government Bill No. 95, toParliamentary in the parliamentary year 1991/92on Freedom of Choice and Independent Schools.)

Rapp, Geoffrey (2000) “Agency and choice ineducation: Does school choice enhance the workeffort of teachers?” Education Economics.8(1)37–63.

Rouse, Cecilia Elena (1998) “Private schoolvouchers and student achievement: Anevaluation of the Milwaukee parental choiceprogram.” Quarterly Journal of Economics,113:2:553-602.

Sandström, F. Mikael & Fredrik Bergström (2002)“School vouchers in practice: Competition won’thurt you!” IUI Working Paper No. 578. (Availableat: http://www.iui.se/.)

Tham, Carl (2001) “Alla vinner på en gemensamskola.” Pedagogiska magasinet, 3/2001.[“Everybody gains from a communal schoolsystem.”]

Tirole, J. (1997) The Theory of IndustrialOrganisation. Cambridge, Mass. and London:MIT Press.

“Valfrihet i skolan” (Prop. 1992/93:230)(Government Bill No. 230, to Parliament in theparliamentary year 1992-93 on school choice.)

Vedder, Richard & Hall, Joshua (2000) “Privateschool competition and public school teachersalaries.” Journal of Labor Research.21(1)161–68.

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1 It should be pointed out that Sweden is not afederal state. The municipal boundaries can bealtered, and municipal responsibilities can bechanged by the national government without theconsent of the municipal governments. However,Sweden has a long tradition of municipal self-government, and the municipalities have wide-ranging authority.2 The terminology can be somewhat confusing, notleast since public schools in the UK are privatelyowned, managed and financed. In some instances,the term private school is reserved for schoolsfinanced mainly through pupil fees. We use theterm “independent school” to denote a school that isowned and run by an agent other than the local ornational government, regardless of whether itreceives public funds. An independent school maycover all, parts or none of its operating costs bypublic funds. Thus, both charter schools, schoolsfinanced by vouchers and tuition-based privateschools, as well as British public schools, would fallunder our definition of independent schools. TheSwedish term is either, friskola, “free-school,” orfristående skola, “independent school.”

Endnotes

3 A general reform of the financial relationshipbetween the different tiers of government hasmeant that municipalities pay to or receive moneyfrom the central government based on various socio-economic and demographic variables. This haslargely replaced an earlier system with earmarkedsubsidies to schooling, care for the elderly and othermunicipal responsibilities.4 “Netherlands, The. The Kingdom of theNetherlands (1814-1918).” EncyclopœdiaBritannica.5 The man in charge of this reform was Sweden’spresent Social Democratic Prime Minister GöranPersson, then Minister of Education, who enactedthe change in legislation in spite of fierce oppositionfrom teachers.6 “Proposition om valfrihet och fristående skolor”(Prop. 1991/92:95)7 “Valfrihet i skolan” (Prop. 1992/93:230)8 It is a matter of debate if the conditions are reallyequal. Both the claims that independent schools areunfairly favored and disfavored have been

advanced. A government committee appointed toexamine this matter came to no firm conclusion, butalso established that there are large disparitiesbetween different municipalities as regards thetreatment of independent schools.9 “Kommunernas yttranden om fristående skolor.”Report from the National Agency for Education.10 As pointed out above, it is rather uncommon thatapplications are rejected by the Agency. Rather,many applications are withdrawn. Since the processfrom application to actual start of a school takesapproximately one and a half years, it is perhapsnot surprising that changing conditions cause manyapplicants to withdraw the application.11 For upper secondary schools, Botkyrka ranks 17,with over 15 percent of the students attendingindependent schools.12 At least at the time being. The social democraticgovernment is preparing legislation that will limitthe possibilities of share dividend from companiesrunning independent schools.13 Carl Tham, “Alla vinner på en gemensam skola”[“Everybody gains from a communal schoolsystem”], Pedagogiska magasinet, 3/2001.14 See for example Leibenstein (1966) and Tirole(1997) for further discussion on x-inefficiency. Thereare a number of studies that have shown thesignificance of competition for increased efficiency.In Mueller (1989, Ch. 14) a great number of studiesare presented that show that a public sector that isnot exposed to competition is, in most cases, moreinefficient than corresponding private enterprisesexposed to competition.

15 Rapp (2000) finds that teachers work moreintensively when competition increases and Vedderand Hall (2000) and Hoxby (1994, 2000) show thatwages tend to increase.16 See for instance Caves (1998) for a summary.17 Dagens Nyheter, 22 December 2000.18 For analyses of the Milwaukee experiment, seefor example Rouse (1998) and Greene, Peterson andDu (1999). There are also other experiments withvouchers or similar systems in the USA. Some ofthem are briefly described in Goodman and Steiger(2001).19 See e.g. Couch et al (1993), Hoxby (1994, 2000),Newmark (1995), Arum (1996) and Dee (1998).20 See Bergström and Sandström (2001) andSandström and Bergström (2002). The first-mentioned report, in Swedish with an Englishsummary, is written on commission from the ExpertGroup on Public Finance (ESO), which operatesunder the Swedish Ministry of Finance. The otherreport is a more comprehensive scientific reportavailable as a working paper.21 Unlike many American cities, the central part ofStockholm is considered an attractive and sociallyprivileged area. The social problems are insteadmore pronounced in some of the city’s suburbs.22 SOU 1999:98, p. 48.

26

About the FoundationThe Milton and Rose D. Friedman Foundation is a non-profit, 501(c)(3)organization established in 1996 by Milton and Rose Friedman. Theorigins of the foundation lie in the Friedmans' long-standing concernabout the serious deficiencies in America's elementary and secondarypublic schools. The best way to improve the quality of education,they believe, is to enable all parents to have a truly free choice of theschools that their children attend. The Friedman Foundation worksto build upon this vision, clarify its meaning to the general publicand amplify the national call for true education reform throughschool choice.

The Milton & Rose D. Friedman FoundationOne American Square . Suite 1750

Indianapolis, Indiana 46282317-681-0745 phone . 317-681-0945 fax

www.friedmanfoundation.org

Published 12/02 ©