Public vs. Private: The Industrial Organization of Education and Other Regulated Markets

This dissertation studies two distinct but equally essential industries: higher education and water utilities. In the context of higher education, I investigate the impact of subsidies on equilibrium prices and quality levels. For water utilities, I explore the differences between public and private providers in terms of productivity and investment. A theme that emerges from these seemingly disparate analyses is how public provision or subsidies affect and contrast with private firms' behavior. Throughout this process, I use the lens and methods of Industrial Organization to conduct my analysis, a choice motivated by the inherent nature of imperfect competition that characterizes these sectors. By adopting this approach, the dissertation aims to uncover the complex interplay between public intervention and for-profit motives in shaping industry outcomes. The first chapter's central question is how to adequately measure the quality of undergraduate programs. We measure quality using value-added models, where a student's post-graduation outcome is determined by their pre-enrollment characteristics and a program fixed effect, which we interpret as the program's value added. To do so, we link multiple administrative datasets to track individual students before enrollment, during college, and after college. We consider two post-graduation outcomes: a standardized "exit" exam, which tests students' major-specific knowledge, and income from a matched employer-employee database. The estimates indicate that colleges' contributions to students' academic achievement and to their salaries are correlated. We show that a sizeable part of the variation in value added is explained by inputs to value-added production. In particular, the composition of instructors in terms of educational attainment and type of work contract are strong predictors of value added. Lastly, we find that value added increases in the share of students receiving subsidy support. In the second chapter, we develop a static equilibrium model of demand, pricing, and quality provision. We consider two counterfactuals: decreasing the supply of loans by 10% and decreasing the supply of scholarships by 10%. We find similar patterns under both scenarios but much stronger effects for scholarships. In particular, by lowering the supply of scholarships by 10% in each program across the country, there would be 13 thousand fewer students in college, corresponding to approximately 80% of the total reduction in scholarships. For-profit institutions would lose about 9% of their market share, while nonprofits would lose only about 0.9%. Most programs would have an incentive to decrease quality and price, with a median change of -5% in value-added and of -0.7% in price. Crucially, our approach uncovers significant heterogeneity across programs, particularly in terms of student composition and the effects of these policy changes, offering valuable insights into the nuanced impacts of educational subsidies. In the third chapter, I shift the focus to water utilities to investigate how their ownership type affects productivity, investment, and incentives for coverage expansion. First, we use a panel of municipalities to run an event-study analysis of municipalities who switched their operators from public to private. We find that switchers were substantially more diligent in charging customers as they sharply increased the number of meters and fraction of billed water. Moreover, municipalities that switched to private operators show an increase in service coverage but without a sizeable increase in average price. Next, we propose a production function model that incorporates the firm's ownership type. Our estimates suggest that the ownership type of the utility significantly affects its input elasticities and productivity. We find robust evidence that private operators are more productive in generating water volume and revenue. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page: http://www.proquest.com/en-US/products/dissertations/individuals.shtml.]