Can money 'buy' schooling achievement? Evidence from 19 Chinese cities

- I model how student achievement and private tutoring are determined.
- I examine the causal effect of private tutoring on student achievement.
- A heteroskedasticity-based method is used to handle the endogeneity problem.
- Private tutoring has a modest but statistically significant effect on math score.
- Students with lower test score are more likely to benefit from private tutoring.

This paper examines the causal effect of private tutoring on Chinese and mathematics test scores of primary school students in urban China. Because the unobserved determinants of schooling achievement often also influence private tutoring expenditure, the OLS estimate cannot provide a consistent estimate. This paper adopts a heteroskedasticity-based identification strategy proposed by Lewbel (2012) to handle this problem. These estimation results show that, on average, private tutoring expenditure has small but statistically significant effect on the mathematics test score of primary school students, but has no statistically significant effect on the Chinese test score. A 1000 yuan increase in private tutoring expenditure (i.e. 54% of a standard deviation) raises the primary school students' mathematics test score by 1.07 percentage point (i.e. 15% of a standard deviation). The instrumental variable quantile regression combining with Lewbel IV suggests that private tutoring is more likely to improve student achievement at the bottom end of test score distribution. When moving upward to the top end, the effect becomes smaller and even negative although not significant.