Association for Public Policy Analysis & Management

In 1981, the Chilean government implemented a universal school voucher program.  Parents of school-aged children received a voucher that they could use to pay the cost of enrolling their child in a public school or a participating private school.  The financial value of the voucher was independent of family income. In 1993, new legislation allowed private schools participating in the voucher program to charge co-payments to parents in addition to the value of the vouchers. Student achievement did not increase during the first two decades of the voucher program, but sorting of students by socioeconomic status did increase (Hsieh & Urquiola, 2006).

In an effort to boost student achievement and reduce income-based gaps in achievement, the Chilean government passed new voucher legislation (the preferential school subsidy law, or SEP) in 2008. Under SEP, the value of the voucher for students whose family incomes were in the bottom 40 percent of the family income distribution (so-called “Priority students”) was 50 percent greater than the value of the voucher for children from more affluent families.  The reform legislation also mandated that private schools accepting the higher-valued vouchers not charge co-payments to Priority students and that they participate in a school accountability initiative.

Our paper explores the impact of the voucher reform on student achievement and school performance in Chile. We address four questions: (1) how the SEP program influenced the scores of grade 4 students on the national mathematics and Spanish examinations; how SEP influenced the mean and variance in school improvement rates; (3) which schools, defined by pre-SEP characteristics, improved at the fastest rate in the post-SEP period, and (4) the mechanisms that contributed to school improvement under SEP. 

We address our research questions using data on all Chilean grade 4 students during the period from 2005 to 2011.  Our primary strategy is to fit a sequence of multi-level models in which the achievement of individual students is a function of family income and other family and personal characteristics, the school they attend, and the school year, with rates of improvement allowed to differ between the pre-SEP (2005-2007) and post-SEP (2008-2011) periods.  Schools are characterized by their pre-SEP characteristics including location, whether private schools charge tuition, are for-profit or not-for-profit, and the percentage of low-income students they enroll.

Summarizing our results in the order of our research questions, we find:

(1)   Average achievement for both low-income and higher-income students declined between 2005 and 2007, but rose in the years after the 2008 passage of the SEP legislation, and the income-based achievement gap declined.

(2)   The distribution of rates of school improvement varied widely, especially in the post-SEP years.

(3)   Public schools and private schools that did not charge co-payments improved their performance more than did private schools that charged fees. 

(4)   The combination of increased school funding and greater accountability was the primary mechanism through which SEP resulted in improved student achievement.