Do education vouchers prevent dropout at private high schools? Evidence from Japanese policy changes

Although education voucher programs for students attending private high schools have existed in Japan for decades, to date there have been no studies that examine their effectiveness. In this study, we estimate the programs' preventative effect on dropout by using school-track level (academic or vocational) panel data covering all high schools in northern Japan. Prefectural governments have faced increasing dropout rates stemming from financial difficulties, and expanded the scope and amount of their private high school tuition support programs since the late 1990s. We use this variation to identify the effect of tuition support on students' dropout decisions, controlling for initial academic ability of students entering the schools and unobservable school-track effects. We also apply the instrumental variable method to account for the possible endogeneity of policy changes. Our results suggest that increasing tuition support is particularly effective in preventing the dropout of private high school students on nonacademic tracks.