For-profit versus not-for-profit charter schools: an examination of Michigan student test scores

The role of for-profit educational organizations in the predominantly public and not-for-profit K-12 US schooling system is being fiercely debated across our nation. Little empirical research is available to help policy-makers develop informed decisions regarding the educational value that for-profit schools provide to our students. This paper fills in part, for the first time in detail, this void. This paper uses a four-year panel of charter schools from the state of Michigan to estimate a school-level education production function and employ a random effects model that controls for student and district characteristics. The results find no evidence of a change in efficiency when a charter school is run by a for-profit company (versus a not-for-profit company). The analysis developed in this paper takes the debate one step further as well, and examines the role that the size of for-profit firms plays in the associated outcomes. There is some evidence that small for-profit companies are either less efficient or enroll a different type of cohort of students than not-for-profit schools.