This study summarizes the previous discussions on private tutoring, tries to complement the gap in the literature, and suggests a new policy direction.

Following the introduction in Chapter 1, Chapter 2 summarizes the previous discussions on private tutoring. According to the previous studies comparing participation and time spent on private tutoring of students across countries and the analysis of this study, it is clear that hours spent on private tutoring of Korean students tend to be much longer than that of other countries and that, in contrast to most other countries, students with higher academic achievement are more likely to receive private tutoring in Korea. On the other hand, many studies estimating the causal effects of private tutoring investment report a limited effect on improving academic achievement, but a significant impact on the probability of admission to a top university. These results jointly suggest that private tutoring investment in Korea can be regarded socially wasteful in that it only has a significant impact on the ranking competition for college admission, while it does not contribute much to the absolute level of academic achievement of students. As a policy tool to alleviate the costly private tutoring competition, it has often been argued that the government should focus on improving the quality of school education. However, the demand for private tutoring resulting from the ranking competition for college admission may not decrease even if the quality of school education improves. The chapter shows that private tutoring investment did not decrease, but increased, even though the school satisfaction of students improved due to attending a high-quality school.

There is also a view that governmental regulation on college enrollment and tuition intensifies competition for college admission among students, leading to larger investment in private tutoring. Higher education services are supplied by universities and demanded by students at the price level of tuition and at the quantity level of enrollment. Traditionally, the Korean government has strictly regulated the price and quantity of university education, tuition fees and enrollment. In particular, in the Seoul area where most of the prestigious universities in Korea are concentrated, the enrollment of universities has been strictly prohibited since the 1980s. Economically, when prices and quantities are below the equilibrium level, demand exceeds supply and unnecessary competition occurs between consumers. It is possible that the government regulation has prevented universities, particularly very prestigious ones, from increasing their enrollment sufficiently, resulting in increased competition among students.

In order to empirically test the hypothesis that regulation on enrollment and tuition intensifies private tutoring competition among students, there is a need for significant changes in such regulations. Fortunately, around 1995, there has been a significant deregulation on enrollment limit of university, but only in non-capital regions. Exploiting this over-time and cross-region variation in the intensity of regulation as natural experiment, the chapter examines how the deregulation around 1995 affected the likelihood of receiving private tutoring of high school students. Using the data on 4,614 people who graduated high schools over the period of 1982-2005 observed from Education and Social Mobility Survey by the Korea Education Development Institute, this study found that the 1995 deregulation on college enrollment decreased the likelihood of receiving private tutoring of high school students by 9 to 10 percentage points, which amounts to about 1/3 of the sample mean of the outcome variable. In addition, using the deregulation as an instrumental variable for the college admission competition rate in each region, a unit increase in the competition rate was estimated to increase the likelihood of receiving private tutoring in the region by about 5-6 percentage points. In the sample used for the analysis, the average college admission competition rate is about 4:1, so the estimation result suggests that when the competition rate increases from 4:1 to 5:1, the likelihood of receiving private tutoring of high school students tend to increase from 32 percent to 37-38 percent. In order to examine whether the above estimation results indicate a causal effect due to deregulation or merely a correlation, this study also attempted two falsification tests and found evidence supporting the causal interpretation.

The estimation results in Chapter 3 are from analyzing the effects of policy changes in the mid-1990s, and therefore, it is difficult to directly link the results to policy suggestions that are appropriate at this time. In this regard, Chapter 4 examines whether the current level of regulation on enrollment and tuition still causes undersupply of the amount of admissions supplied by university, likely leading to increase in private tutoring investment among students. Specifically, this study theoretically discusses the possibility that universities may try to avoid the regulation by admitting international students who are not subject to the regulation, and empirically examines the plausibility of the theoretical prediction. Analysis of the financial situation and student information of four-year private universities nationwide during 2008-2017 revealed that private universities in Seoul, whose enrollment and tuition are strictly regulated by the government, tend to increase the share of international students when the financial situation deteriorates. On the other hand, for private universities outside the Seoul area where the regulation tends to be less strict, the correlation between the financial situation and the share of international students was not observed. These results support the interpretation that the current level of regulation on enrollment and tuition is binding enough to curb the voluntary admission supply by universities in Korea, thus likely intensifying the competition for admission among Korean students.

Chapter 5 concludes the report and sets out policy directions. It is neither desirable nor possible for the government to curb all private tutoring investments. Rather, the government should focus on identifying and correcting the causes of “rent-seeking” private tutoring. Rent-seeking behavior is motivated by economic rent, and economic rent is formed when supply is limited. The rent-seeking private tutoring, the objective of which is to occupy limited college admission opportunities rather than improving academic achievement or human capital formation of students, occurs because of the limited supply of college admissions, especially those of very prestigious colleges. In this respect, the government should induce colleges, particularly prestigious ones, to increase their enrollment sufficiently.

Preface
Executive Summary

Chapter 1 Introduction

Chapter 2 Previous Discussions on Private Tutoring
　Section 1 Introduction
　Section 2 Patterns of Private Tutoring Investment Across Countries
　Section 3 Effects of Private Tutoring Investment
　Section 4 Determinants of Private Tutoring Investment
　Section 5 Summary and Contributions of This Study

Chapter 3 Impact of University Regulation on Private Tutoring Investment: Focusing on the 1995 Deregulation of Enrollment Limits
　Section 1 Introduction
　Section 2 Institutional Background
　Section 3 Data
　Section 4 Theoretical Model
　Section 5 Empirical Analysis
　Section 6 Conclusion

Chapter 4 Dual Regulation of Universities and the Role of International Students
　Section 1 Introduction
　Section 2 Enrollment and Tuition Regulation and International Student Enrollment
　Section 3 Theoretical Model
　Section 4 Data for Analysis
　Section 5 Empirical Model
　Section 6 Results of Analysis
　Section 7 Conclusion

Chapter 5 Conclusion and Policy Recommendations

References
Appendix
ABSTRACT