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Experiences with Vouchers for Basic Education: A Principal-Agent Perspective

Experiences with Vouchers for Basic Education: A Principal-Agent Perspective. Varun Gauri, DECRG October 17, 2002. The Archetypal Education System. Centralized management and hiring General revenue finance Direct payment of operating costs Students assigned to schools

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Experiences with Vouchers for Basic Education: A Principal-Agent Perspective

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  1. Experiences with Vouchers for Basic Education: A Principal-Agent Perspective Varun Gauri, DECRG October 17, 2002

  2. The Archetypal Education System • Centralized management and hiring • General revenue finance • Direct payment of operating costs • Students assigned to schools • Remuneration and promotion based on negotiated, experience-related criteria

  3. Voucher Programs • Parents choose schools: public / private • Intense incentives on enrollments • Managerial autonomy to respond to demand

  4. Three Simultaneous Reforms • Autonomy without intense incentives (Chicago, El Salvador) • Choice without autonomy (Minnesota, Detroit, de facto developing countries) • Intense incentives without choice (high stakes accountability, merit pay)

  5. Principal-Agent approach to vouchers • The state is the principal • The schools are the agents • Enrollments are the sole measure of school effort • School payments =  + (e + x + y)

  6. The Estimate of Effort • Prima facie plausibility • Potential systematic bias: conflate student body with quality of education, and latter with effort • Noise: remoteness, birth rate, migration, returns to education, cultural expectations on who should be in school

  7. Evidence on Bias and Noise • Small impact in US studies (Myers 2001, Rouse 1998), Chile (Hsieh and Urquiola 2001, McEwan and Carnoy 1999) • Students flee minority schools in New Zealand (Fiske and Ladd 1999, 2000) and Sweden (Daun 2002) • School selection in Chile (Gauri 1998, Espinola 1995) and New Zealand

  8. Productivity of More Effort • Limited if teacher training inadequate, textbooks unavailable, rules restrictive, students malnourished, teachers politicized, difficult to recruit teachers: Cote d’Ivoire (Michaelowa 2001, World Bank 1999) • Substantial if surplus capacity in private schools: Colombia (Angrist et al 2001)

  9. Relative compensation across activities • Activities rewarded at lower rates will receive little or no effort • Teacher training: Cote d’Ivoire • Curricular innovation: Chile, New Zealand, UK (Walford 2002)

  10. Value of Monitoring • Rewards for exaggerating enrollment rates, loosening academic standards • Anecdotal evidence in Chile, Cote d’Ivoire • Evidence to the contrary in Colombia

  11. Risk Averse Agents • The greater the risk aversion, the higher the welfare cost from intense incentives • Teachers lobby not to be fired, transaction costs of selling schools • Few schools closed in Chile, New Zealand

  12. Bottom Line • Bias and noise in the estimate of effort – include co-variates and controls • Need monitoring, risk-averse agents, limited returns to effort: vouchers are costly • Useful over range where marginal returns to effort are high: poor students, excess capacity in private schools • Useful for disadvantaged students (?)

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