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CESifo: The German educational system needs extensive institutional reforms to improve its efficiency and ultimately to turn out better trained pupils. This is the result reached by Ifo educational economist Ludger Wößmann in his series on the contribution of economics to the educational debate. The requirements he identified are: external examinations, school autonomy and competition.

His evaluation of the different international pupil tests – PISA, TIMSS and PIRLS – shows that pupils perform better when standards are tested externally, when these external examinations are combined with school autonomy, particularly in process and personnel decisions, and when competition is combined with public school financing through privately administered schools. The current school structures are inefficient, according to Wößmann. He argues against demands for undifferentiated increases in educational spending.educwoss
An efficient educational system is based on three pillars. It tests the given standards externally and lets the schools decide how best to achieve these standards. In addition it allow the state to finance school education but assigns the task of administering the schools to the private sector, since the combination of private school administration with public financing ensures the greatest freedom of choice and competition and thus the best pupil performance. Such institutional conditions create stimuli for all participants to effect optimum pupil performance by combining performance enhancing and hindering behaviour with the corresponding consequences and thus make the participants themselves responsible for their actions. In addition, a reward system can also be introduced: Teacher pay linked to increases in performance means better pupils.

Wößmann shows in detail that the difference in pupil performance in countries with and without external final examinations is almost one year. “The teacher must ensure that the class has mastered the entire curriculum if an external examination is taken at the end of the year”, Woessmann explains.

Even with greater autonomy of the schools there are clear boundaries. The selection of textbooks and teachers is positively correlated with the performance of pupils, but the fixing of the budget is not. From this reason the budget framework and teaching standards should be prescribed.

The third reform step is to introduce more competition between private and public schools. The performance advantage of pupils at privately administered schools is more than half a school year.

Privately administered does not necessarily mean privately financed. In the PISA tests countries like the Netherlands that have a high share of privately run schools with a large degree of public financing perform particularly well.

Together with the two preceding articles in the series on the contribution of economics to the educational debate, the international empirical evidence presented suggests that educational policy should concentrate more on a performance-enhancing reform of the institutional structure of the educational system than on a mere expansion of funding for the present system. (emphasis mine)

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