School Choice, Incentives, and Academic Outcomes: Evidence from Chile

This paper examines the effects of inter-school competition on student outcomes by using exogenous variation in the availability of private schools in Chile. Given that naïve estimates of the effects of competition on student outcomes are biased by endogenous entry of schools, this paper uses variation in the number of Catholic priests per capita in different school markets, as an exogenous determinant of the supply of private schools. Results suggest that greater competition significantly raises both test scores and the productivity of schools. There is also evidence that the effects of school choice are significantly larger for students attending subsidized private schools, and insignificant or even negative for students attending public schools facing softer budget constraints