Missed opportunity by the New Zealand Herald on school fees and student performance

I was interested to hear the New Zealand Herald's Front Page podcast this morning, which focused on two issues: (1) the high and increasing cost of private schools; and (2) the close correlation between student performance at high schools (as measured by NCEA pass rates) and a measure of socioeconomic status (the Equity Index, or EQI, which replaced the decile ranking system at the start of last year). The first issue was interesting but uninspiring. It's hard to feel sorry for the rich families who have to pay even more to send their kids to private school. You could try to argue that it makes private school even more unaffordable for low-income families. But, newsflash! Private school is already unaffordable for those families. When something is already so expensive that some people can't afford to buy it, making it even more expensive doesn't make those people any worse off.

What I want to focus on is the second issue (which is based on this paywalled article). As New Zealand Herald head of data Chris Knox noted in the podcast, there is a very strong correlation between NCEA (and University Entrance) pass rates and the Equity Index (in fact, a student group project in BUSAN205 last year showed this quite clearly). Higher socio-economic schools have higher pass rates. On top of that, Knox noted that private schools have higher pass rates than public schools.

The combination of those last two results makes me wonder. What is the cost, to parents, of sending a child to a school with a higher pass rate? In other words, what is the parental willingness-to-pay for an additional percentage point of pass rate? It would actually be relatively easy to work out the correlation between school fees and NCEA pass rates, controlling for the EQI and other relevant school-level variables. All we would need is data on pass rates, EQI, and other school variables (all available from the Education Counts website), and data on school fees (which might need to be hand-collected from school websites - I don't think that data is collated anywhere [*]). The results of this analysis would provide a lower-bound on how much parents are willing to pay for additional pass rates (it is a lower bound, because it is what they actually pay - they might be willing to pay even more, if the school was bold enough to charge higher fees).

This was definitely a missed opportunity by the Herald team. Their results are interesting but, aside from showing correlation rather than any causal relationship (as my ECONS101 class covered last week), they don't show us something that would be of great interest to economists. And not only economists. No doubt schools themselves would be interested to know how much parents are willing to pay for higher pass rates. That way, schools that have high pass rates would feel justified in charging higher fees.

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[*] That's the main reason why I haven't already done this analysis. Education Counts has some data on school donations (that is, fees), but it's really just a collation of how many schools in each region have opted into the government scheme that gives them higher funding if they make school fees voluntary for parents.