SCHOOL QUALITY, CLUSTERING, AND GOVERNMENT SUBSIDY 63


fee increases the number of nonsubsidized educators, while government funding decreases the number. Third, and most interestingly, the interaction term of log school fee and change in the number of learners shows a signifi- cant positive effect, which implies that with a higher school fee (that is, a greater ability to pay for schooling in the community), an increase in the number of learners can be accommodated by an increase in privately paid educators. These results are consistent with the prediction that communities that are capable of paying for schooling investments will increase the quality of education for the next generation with their own resources. In the last column, per-learner funding is regressed on the 1998 school fee and 1996 LER with fixed effects of former population group, school type, and circuit. The estimate shows that in 2000 those schools (and areas) that were initially less well endowed were likely to receive more funding from the government.


Conclusions


Neighborhood factors matter, as agents with similar socioeconomic back- grounds are likely to be clustered in the same space. This happens partly because apartheid created inequality in income opportunities (correlated with population groups) and introduced spatial segregation by population group, and partly because even after the abolition of apartheid, financial constraints remained important in choice of residential location, which in turn determines access to income and educational opportunities. This chapter examined historical and spatial factors that determine education quality and a community’s capacity to finance education in post- apartheid South Africa. Our findings show that both historical and financial constraints matter in terms of access to quality education. First, population group compositions created by apartheid (especially proportions of Africans and whites) at the subplace level and by the former departments of edu- cation significantly affect school fees and therefore quality of education. Higher school fees are charged in residential areas with a large proportion of whites in the population. Second, average income, schooling, and unemploy- ment rate at the subplace level also influence the determination of school fees, a finding that implies the existence of an imperfect credit market. Migration to cities became unrestricted when legal constraints were lifted after the abolishment of apartheid, and thus income mobility is now more dynamic in urban areas. As a result financial constraints are more important and population composition is less important in large cities. Wealthier house- holds can move to well-off (that is, formerly white) residential areas to send their children to better schools, a practice that was formerly prohibited. This is happening in the areas surrounding large cities.


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