A 2-equation model indicates that an increase in spending per student will attract students into the public school system. In turn, the response of the local government to this influx of students will be additional expenditures on education, but not such as to maintain the target level of spending per student. (Author)

The higher proportion of private school enrollments in developing countries appears to stem from limited public spending, creating excess demand for public schools. Random variation across countries appears because of cultural, especially religious, heterogeneity. (SK)