This dissertation studies the effects of contracting out in K-12 education through three essays. Public education in the United States is increasingly delivered through contracts rather than direct government provision: charter schools outsource the operation of public schools to non-government providers. Georgia's charter system reform extends the same logic to the traditional public school districts (TPSDs). Three questions follow: (a) How does contracting out public education provision to charter schools affect the financial condition of TPSDs? (Chapter II), (b) Does contracting out public education provision raise the borrowing costs of TPSDs? (Chapter III), and (c) Does applying the performance-based contract to the traditional public education system improve education outcomes? (Chapter IV). Each essay uses a distinct identification strategy to address the non-random nature of contracting out. The first essay asks how charter competition affects the financial condition of Georgia TPSDs. Using an instrumental variables strategy on 2015 to 2019 data and four need-capacity indicators, it finds that contracting out education through charter schools reshapes the financial condition of traditional public school districts by changing the fiscal environment and fiscal policy decisions of TPSDs, but the magnitude and direction of these fiscal externalities depend on charter funding design and district context. The second essay asks whether contracting out affects the cost of capital. Using a national panel of general obligation bonds from 2011 to 2019 and a Heckman two-step procedure, it finds that charter entry is associated with an increase of about 15 basis points in true interest cost, which translates into roughly $15,700 per year on average in additional interest on an average-sized issue, or about $314,000 over a 20-year term. It shows that the fiscal stress of contracting out might cause a long-lasting hidden cost for TPSDs. The third essay asks whether Georgia's charter system reform improved district outcomes. Using 172 districts from 2004 to 2014 and a staggered synthetic difference-in-differences design, it finds little effect on the passing rate of state standardized test outcomes. Bringing the performance contract inside the district through Georgia's charter system reform did not improve district education outcomes, indicating that incentives and regulatory flexibility alone do not improve education outcomes and that policy design and implementation are critical factors.