The challenge
Chile wanted competition between schools to raise educational quality.
The case
In 1981 Chile introduced a universal voucher system: schools received a per-student payment, and private schools that accepted vouchers could compete with public ones. Private enrollment grew sharply. But studies found little evidence that competition improved average test scores, and middle-class families moved to voucher schools, increasing sorting by income. Chile has since reformed the system, including extra funding for disadvantaged students and limits on selection and fees. After vouchers arrived, more than 1,000 private schools entered the market and the private enrollment rate rose by 20 percentage points, Hsieh and Urquiola report.
Why the results were mixed
Competition alone didn't raise learning; it mostly redistributed students, with better-off families leaving public schools. Market designs need rules on selection and funding for disadvantaged students.
Sources
- Hsieh, C.-T., & Urquiola, M. (2006). The effects of generalized school choice on achievement and stratification: Evidence from Chile's voucher program. Journal of Public Economics.
- Hsieh, C.-T., & Urquiola, M. (2006). The effects of generalized school choice on achievement and stratification: Evidence from Chile's voucher program. Journal of Public Economics (NBER Working Paper 10008).
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