The Review of Austrian Economics, 18:1, 29–54, 2005.
2005 Springer Science + Business Media, Inc. Manufactured in The Netherlands.
The Regulation of Private Schools Serving
Low-Income Families in Andhra Pradesh, India
PAULINE DIXON email@example.com
JAMES TOOLEY firstname.lastname@example.org
E.G. West Centre, University of Newcastle, Newcastle upon Tyne, England, NE 1 7RU
Abstract. This paper sets out some ﬁndings of a research project carried out in private unaided schools in low-
income areas of Hyderabad, India. The part of the research project documented here was designed to examine
the question: ‘Is the regulatory regime conducive to entrepreneurial action and market discovery’ with particular
reference to the low-income schools in Hyderabad. This paper is narrowly focused, setting out the results of pattern
matching empirical data with the Austrian economic concepts of entrepreneurship, rivalry, and market discovery.
The research discovered that two regulatory regimes exist, one that is set out ‘on paper’ in the Education Acts and
associated rules, and another that operates ‘in practice’. That is, there is a combination of regulations ‘on paper’ and
regulations existing in an ‘extra-legal’ sector. Generally it was found that the regulations ‘in practice’ are consistent
with market principles. Conversely the regulations set out ‘on paper’ are not conducive to entrepreneurial innovation
and market discovery. Recommendations for potential policy initiatives include the possibility of legitimising the
‘extra-legal’ sector by introducing self-regulation possibly via self-evaluation systems for the private unaided
KeyWords: competition, entrepreneurship, proﬁt, regulation, private schools, low-income families, developing
JEL classiﬁcation: B53, I22, I28, I38, K23.
This paper sets out some of the ﬁndings of a research project carried out from
November 2001 to December 2002, in private unaided schools serving low-income fami-
lies in the metropolitan twin cities of Hyderabad and Secunderabad, in the state of Andhra
Pradesh, India (the twin cities are referred to locally, and therefore throughout this pa-
per, as “Hyderabad”). The original project’s aim was to identify ways to assist with ca-
pacity building and improvement in private schools aimed at low-income families in In-
dia. This brief included an examination of the regulatory environment, its impact on the
private schools and its potential reform. The speciﬁc focus of this paper is the extent
to which this regulatory environment is conducive to entrepreneurial action and market
There are three different school management types in India—government, private aided
(“Grant-in-Aid” schools), and private unaided schools. Government schools are run by
Pauline Dixon is a Research Associate, and James Tooley is Professor of Education Policy at the University of
Newcastle Upon Tyne, England.