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The B.E. Journal of Economic Analysis & Policy

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Volume 16, Issue 4


Volume 19 (2019)

Volume 6 (2006)

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Volume 2 (2002)

Volume 1 (2001)

The Effects of School Closure Threats on Student Performance: Evidence from a Natural Experiment

Ming Ming Chiu / Sung Wook Joh
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  • College of Business Administration, Seoul National University, Gwanak-gu, Seoul 151-916, Korea
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/ Lawrence Khoo
Published Online: 2016-06-22 | DOI: https://doi.org/10.1515/bejeap-2015-0149


We exploit a natural experiment to test whether school closure threats can increase staff effort and improve performance. The Hong Kong government overestimated post-1997-Handover mainland Chinese immigration and local births, creating excess capacity in many school districts. In 2003, with student enrollment falling to new lows (increasing cost per student), the government announced that it would close schools that were unable to recruit enough students. Since schools compete for students within their own district, the accidental excess capacity created closure threats that varied by district. Difference-in-differences analyses show that after initiation of this policy, student scores in heavily overbuilt districts were lower than scores in other districts and lowest in districts with the fewest students per class. Although closure threats were counterproductive for improving performance, the school closures eventually improved overall school quality, as typically, the lowest performing schools in each district closed.

Keywords: closure threat; excess capacity; competition; school performance; natural experiment

JEL Classification: I2; G3; H3; D4; L2


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About the article

Published Online: 2016-06-22

Published in Print: 2016-10-01

This work was funded by the Institute of Finance and Banking at Seoul National University, Seoul National University Research Grant (for Humanities and Social Sciences), and Institute of Management Research, Seoul National University.

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 16, Issue 4, 20150149, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2015-0149.

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