The E¤ects of Decentralization on Schooling: Evidence From the Sao Paulo States Education Reform

Decentralization of the delivery of public services provision is an important governance reform recently witnessed in many developing countries. Public education has been one of the key public services devolved to lower level governments. This paper uses an exclusive and rich longitudinal data on primary schools to evaluate the e¤ects of the decentralization reform implemented on the State of Sao Paulo, Brazil, on several indicators of school performance and school resources. Speci…c aspects of the Sao Paulo’s State education reform combined with the data available allow me to deal with some common identi…cation issues encountered by previous empirical studies on the subject. I …nd con‡icting results for di¤erent school quality measures; decentralization increased dropout rates and failure rates across all primary school grades but improved several school resources. Further empirical investigation suggests that the worsening of these school performance indicators for the two …rst grades was partially driven by the democratization of the school access promoted by the education reform. Evaluation of the distributive outcome of the reform suggests that its e¤ects were more perverse for schools located on rural and poor areas. I also …nd evidence that decentralization widened the gap between the “good”and “bad” schools. Moreover, I …nd no evidence that the municipalities’administrative experience a¤ected the program’s outcome. Keywords: Decentralization of Public Services, Education Economics, School Quality and Program Evaluation. JEL Classi…cations: I2, I28, H43, H7 and C21 Department of Economics, Boston University. 270 Bay State Rd., Boston, MA 02215, USA; e-mail: [email protected]. I thank Dilip Mookherjee, Kevin Lang, Victor Aguirregabiria, Patricia Meirelles, Gabriel Madeira and participants of the BU empirical micro seminar for their helpful comments. I have bene…ted from discussions about the “Municipalizacao do Ensino” program with several scholars and government o¢ cials, I am especially thankful to Hubert Alqueres, Neide Cruz, Felicia Madeira and Rose Neubauer. Financial support from the Boston University’s Institute of Economic Development (IED) and the Brazilian Ministry of Science and Technology (CNPq) were essential for the realization of this paper. I am also extremely thankful to Eliana Rodrigues who provided excellent assistance with the manipulation of the GIS data. All remaining errors are mine.