An Alternative Instrument for Private School Competition

Abstract

Empirical studies estimating the effect of private school competition on student outcomes commonly use the share of Catholics in the local population as an instrument for private school competition. However, it has recently been argued that since this instrument is likely to be correlated with unmeasured student characteristics that vary across localities, it cannot be a valid instrument for private school competition. I suggest using instead the local share of Catholics in the population in 1890 and its squared term. I show that these instruments are very strong and are also exogenous to both student achievements and private school competition. These instruments can also be applied to estimate the treatment effect of Catholic schools.School choice, demand for schooling, Catholic share, competition.