Targeted Vouchers, Competition Among Schools and the Academic Achievement of Poor Students

Abstract

In this paper I present evidence that the structure of voucher policy design can have significant effects on the incentives schools face and can have important effects on the distribution of academic achievement across socioeconomic groups. I estimate a model of demand for schools using administrative data from Chile leveraging a significant policy change that effectively eliminated out-of-pocket tuition fees for almost half of students at most schools. Demand estimates are used together with a simple model of for-profit school competition to provide an empirical framework to highlight that a policy environment with a flat voucher leads to heterogeneity in competitive incentives and contributes to inequality in school quality. Finally, I show evidence that a shift from a flat voucher to a targeted voucher implemented in Chile diminished local market power of schools in poor neighborhoods and contributed to a supply side driven increase in the academic achievement of poor students.

Article
  • Published: Econometrica
  • Date: 2017
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