Economics of Private Tutoring : In Search for Its Causes and Effective Cures - KDI 한국개발연구원 - 연구 - 보고서
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Research Monograph Economics of Private Tutoring : In Search for Its Causes and Effective Cures 2002.12.31


Series No. 2002-01

Research Monograph Economics of Private Tutoring : In Search for Its Causes and Effective Cures #고등교육 #교육 일반(기타)


  • KDI
This book tries to uncover the economic forces at work under the phenomenon
known as private tutoring, a social headache the Korean society has long
grappled to cope with. Finding the real economic causes behind private tutoring
would facilitate formulating effective cures for the disease, if it can be
called a disease at all. Broadly speaking, students take private tutoring for two
distinct purposes: for successfully advancing to the next stage of the hierarchical
ladder of education, and for entering a better quality school. This book
explores the economic incentives working at these two fronts.

Most high school students expect to advance to college when they graduate,
as most middle school graduates expect to attend high school as a natural
course of matters. When these expectations are somehow threatened and, as a
result, when students cannot be sure of the advancement they had long
planned as a natural sequence, they take private tutoring, to keep their plans as
intact as possible. They buy whatever they believe would help improve their
odds of advancing to the next stage of education. They study harder at home,
hire a tutor or enroll at private academic institutions to help them, to get ahead
of others who are equally desperate in achieving the same goal. This implies
that if every student is assured of the thing he/she desires to have, no one
would take private tutoring to have the upper hands over others. This is the
first proposition that has been established in the thesis. With no excess demand
for higher education, there would be no private tutoring.

We can think of two different ways of distributing something valuable, say
a diamond, to people. One conventional way of distribution is to ask the contenders
to pay the price. The price will be determined in the manner of auction.
And the highest bidder will get the prize. To earn the money with which to
buy the diamond, the demander has to provide something valuable to others.
That something valuable to others is production. Higher productivity is gained
this way in a free capitalistic society. Nothing is lost in the distribution process.

There is another way to distribute the diamond. The diamond can be given
for free, but with a proviso that the contender does something that the diamond
owner asks him/her to do. As an example, suppose that the owner asks
the contenders to stand in line on one foot for several hours. The one who can
tolerate the hardship for the longest hour will get the prize. People stand in
line, wriggling on one foot, sweating and frowning from pain, until there is
only one person left. In the end, the diamond is handed over to the longest suf-ferer.

In both cases, the social task of distributing a diamond has been successfully
executed. The second method, however, is non-sensical if one assumes
that watching people suffering on one foot while in line pleases nobody. There
is a social loss, keeping people suffering for several hours for no apparent
social good. Each individual in the line is behaving rationally, but from the
standpoint of the society as a whole, the second method of distribution is a
sheer absurdity. Private tutoring has a similar element in it: students suffer for
nothing from a social point of view. This is the second proposition of the thesis.

Why do we then keep this social absurdity? Surprisingly, explanations
abound, although none of them stand scrutiny, and some of them are even selfcontradictory.
The real tragedy is that there is no shortage of reasons, halfbaked
as they may be. So in the end, this only results in a perpetuation of the
deplorable situation. Some people argue that an excess demand in the higher
education market is inevitable or even desirable. They contend that education
is different from other ordinary goods; it has the property of public goods or
positive externalities; and, therefore, it is argued that tuition must be kept
below the market clearing equilibrium level. Basic education aside, the proposal
to subsidize college education whose benefit would exclusively accrue to the
student him/herself, however, doesn’t make sense at all.

Others contend that college education has to be subsidized for the purpose
of enhancing equity because college education is the most effective means
to improve one’s future income. If this is true, however, public aid must be
given to other non-college students because college students have already
secured one of the surest means to become rich. Furthermore, the statement
cannot be true unless the higher education market is somehow artificially regulated.
In spite of this, if one keeps tuition low to help the students, it would
only end up with helping the high and middle income groups of the society
because most of the college students come from those groups, thus aggravating
the income distribution.

If sum, either from an efficiency or from an equity point of view, keeping
college tuition low, and thus maintaining a chronic excess demand for college
education, cannot be justified. The argument for imposing a college enrollment
quota cannot stand either. More than anything else, controlling the total
number of college students below the market equilibrium level cannot go hand
in hand with the view that college education has to be subsidized to promote
its consumption.

Despite all these negative conclusions, educational authorities have been
playing with some innovative ideas to reform student selection methods, but
still keeping the overall imbalance in the higher education market intact. These
measures include earmarking some slots for special students such as from
rural areas or abroad, making the Academic Aptitude Test easier, asking more
essay type questions than multiple choice questions, making private tutoringmore costly to take, including an outright ban of all tutoring activities outside
school, etc. Unfortunately, the effects of all of these measures are again dubious
as some students are expected to take more tutoring and others less, depending
on the elasticity of demand for tutoring, and the current state of competitiveness
of college admittance, etc. Some of these measures would only deteriorate
the average quality of the students body as they make the selection process
contaminated with more noises.

Turning our attention to the second reason for private tutoring, i.e., tutoring
for the purpose of entering a better school, we can once again prove that
some of the measure taken have been ungainly as far as the possible effects are
concerned. First of all, it must be noted that the competition to go to a better
school occurs because of price control and resultant imperfect pricing of the
quality differentials among schools. Without resolving this fundamental cause
of the problem, any off-hand allopathic measures are not likely to generate the
desired effects. In particular, the Secondary School Equalization measure taken
in late 1960s and early 1970s is very unlikely to have positive effects on reducing
private tutoring. Rather it appears to have done more harm than good.
The intuition for this theoretical conclusion is easy to grasp. Suppose there are
two alternative routes to take to expedite students’ choice for better schools;
one is school education, and the other private education. Then it can be easily
concluded that the Equalization measure has simply rendered one of the
routes, school education, to be less effective and less rewarding, and thus
caused the students to stampede to another alternative route, private education.

All in all, the analysis in this book strongly suggests that economic forces
are always well in force under the surface, and the phenomenon of private
tutoring is the result of these natural forces working within a misguided and
mismanaged education system. One sure way to cure the social disease is,
therefore, to put the education system back in order and let the economizing
forces make their way toward a socially desirable direction.


Chapter 1.Introduction

Chapter 2.College Education as a Good

2-1.Supply and Demand in the College Education Market
2-2.Excess Demand for College Education and Private Tutoring
2-3.Possible Solutions to Private Tutoring Problem
 A.Ration Coupons
 B.Allowing Tuition to Rise
 C.Expansion of Enrollment Quota

Chapter 3.Special Features of Schooling,Entrance Exams, and Private Tutoring

3-1.Special Features of Education
3-2.Economic Role of Entrance Exam and Self-Selection
 A.Economic Role of Entrance Exam
 B.Which School Is a Good
 C.Self-Selection and Competition to Enter a Better School
3-3.The Middle and High School Equalization Policy
3-4.First-Class School Disease and Cliquism
 A.An Obsessive Pursuit of First-Class Schools
 B.Economics of Privilege:Its Creation and Exclusive Sharing

Chapter 4.Reforms in Entrance Exam and Private Tutoring

4-2.Basic Model
 A.The Effects of Varying Valuations Among Individuals
 B.Changing the Cut-Off Score of the Test
 C.Reducing the Effectiveness of the Private Tutoring
 D.Increasing the Noise of the Test
 E.Increasing the Cost of Private Tutoring
4-3.Rent Seeking Under the Quota System
 A.Increasing the Admission Quota
 B.Increasing the Cost of Private Tutoring
 C.Lowering the Marginal Returns to Private Tutoring
 D.Increasing the Noise of the Test
4-4.Rent Seeking Under Tuition Control
4-5.Summary and Conclusion

Chapter 5.Competition to Enter a Better School

5-2.The Model
 A.Problem of School Choice
 B.Problem of Choosing Optimum Private Tutoring
5-3.Comparative Statics and Properties of the Equilibrium
5-4.Effects of School Equalization Measure

Chapter 6.Summary and Conclusion

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