The Economic Analysis Of Private Tutoring Institutions

This paper analyzes the economic forces that are behind the rapid development of private tutoring institutions in China,applying the transaction cost theory.The phenomenon of private tutoring has become a social headache in the Chinese society in recent years,which has put students and parents under enormous pressure.The central government has recently started to take serious administrative and legal actions to tackle this problem,which is beginning to threaten the existence of private tutoring institutions.The need for private tutoring arises from learning difficulties that students experience in schools,and their desire to enter a better-quality school.The paper begins by analyzing how the traditional home tutoring transactions were prohibited by transaction costs,and then studies how tutoring institutions are able to facilitate such transactions by providing a reduction in transaction cost both for teachers and students.The lowered transaction cost for students has helped to generate a surge in demand for private tutoring,while the lowered transaction for teachers has encouraged a large number of teachers to join the tutoring institutions rather than working as home tutors or for schools.Efforts by tutoring institutions to provide such reduction has led to their business success,but also given rise to multiple social problems.Finding the real economic causes behind these problems would facilitate formulating effective cures for the educational distress our society is in.It’s argued that a good regulation should not try to illegalize private tutoring institutions,but to eliminate excessive demand for private tutoring by reforming our educational system,while allowing qualified tutoring institutions to stay in business under strict government supervision.