Targeted Vouchers, Competition Among Schools and the Academic Achievement of Poor Students
I develop an empirical model of demand and supply with imperfect competition to study the primary school market in Chile. I use this framework to study how voucher policy affects competitive incentives and the equilibrium allocation of school quality. I estimate my model using administrative data, leveraging variation from a policy change that eliminated out-of-pocket fees for approximately 40 percent of students. The model indicates that schools can increase prices above marginal cost and mark down quality below the perfectly competitive benchmark. Schools in poorer neighborhoods have more local market power and this contributes to inequality in access across socioeconomic groups. I find that a voucher system that provides more resources for poor students would reduce schools market power and increase school quality. Using the observed policy change, I show that competition increased in the poorest neighborhoods and consequently reduced the inequality of academic achievement.
Current Working Paper (under review at Econometrica)
Supplements to Online Appendix
Graphs From the Paper
- Published: Econometrica (R&R)
- Date: 2020