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This paper develops a theoretical model of private school entry and estimates it using data from Brazilian municipalities. The school market is different from other markets because of the cream skimming effect. If peer effects are important, a private school only has to attract the best local students to be better than the existing public schools. The model has clear predictions about the relationship between entry, the size of the student population, average income and inequality. The econometric results
confirm most of the predictions of the theoretical model. The probability of entry of a private school is positively related to the interaction between income and size of the student population in a city and to income inequality. Education inequality, a proxy for the range of abilities, is also
correlated with entry, both in secondary education and in high school. The effect of inequality on entry declines with average income.

entry, school market; education; private education