Funding and School Accountability: The Importance of Private and Decentralised Public Funding for Pupil Attainment

We discuss the issue of how schools should be financed, concentrating on the role of private funding and public funding via sub-national governments as accountability mechanisms in the provision of educational services. The historical evolution of school regulation in Italy and Spain has created differences in the percentage of pupils who attend private schools, the percentage of private school funding coming from public and private sources, and the percentage of public school funding that comes from central or local government sources. We take advantage of these institutional diversities rooted in history to estimate the disciplining role of these different sources of funding in the context of an educational production function using PISA data. Our results provide support to both accountability mechanisms, and point to the presence of an important interplay between them.