What’s Decentralization Got To Do With Learning? Endogenous School Quality and Student Performance in Nicaragua

Despite its growing popularity, school-based management is seldom evaluated systematically with respect to its impact on student performance. This study examines the impact of the current school autonomy reform in Nicaragua on learning within an educational production function approach. Results show that autonomous public schools are indeed making more decisions about pedagogical and administrative matters than do traditional public schools, but also that the increase in decision-making at the school level is observed across the entire spectrum, not just for legally autonomous schools. Because of this, autonomy, de jure, does not appear to have any impact on student test scores. However, another autonomy variable which measures the actual level of decision-making (de facto autonomy) by the school is positively associated with student test scores in primary schools. In particular, schools that exert greater autonomy with respect to teacher staffing, salaries, and incentives appear to be more effective in raising student performance. This effect remains after conditioning for teacher attendance and morale. * This paper has been funded by the Development Research Group of the World Bank and its Research Support Budget (RPO 679-18). We wish to thank the other members of the Nicaragua Reform Evaluation Team at the World Bank and at the Ministry of Education in Nicaragua, especially Patricia Callejas, Nora Gordon, Adolfo Huete, Liliam Lopez, Reina Lopez, Nora Mayorga, and Laura Rawlings, and Manuel Vera. We have received insightful comments from Harold Alderman, Jere Behrman, Deon Filmer, Jyotsna Jalan, Peter Lanjouw, attendees at a World Bank DECRG seminar, and participants at an Applied Microeconomics seminar at the Department of Economics at Cornell University. The findings, interpretations, and conclusions are ours and should not be attributed to the World Bank, its Board of Directors or any of its member countries. Comments are welcome and should be sent directly to: [email protected]; and [email protected].