Volij, Oscar; Prado, Maria

Quarterly Review of Economics and Finance Vol. 43 (2003): 51-73.

This paper examines the effects of school vouchers on the equilibrium of a simple two-community model with local provision of education. Individuals differ only in income and one community imposes a fixed cost on its residents. We show that the introduction of a simple voucher system can result in a Pareto improvement as an equilibrium phenomenon. This improvement brings higher education quality to both communities.