Vouchers for Basic Education in Developing Countries: A Principal-Agent Perspective

Advocates argue that voucher programs can correct the incentive problems of educational systems in developing countries. This paper uses a principal-agent framework to clarify the arguments for and against education vouchers. An assessment of findings on voucher programs in industrialized countries, as well as a review of voucher or quasi-voucher experiences in Chile, Colombia, Côte d’Ivoire, the Czech Republic, and Bangladesh, support the usefulness of the analytic framework. It is concluded that vouchers for basic education in developing countries can enhance outcomes when they are limited to modest numbers of poor students in urban settings, particularly in conjunction with existing private schools with surplus capacity. The success of more ambitious voucher programs depends on an institutional infrastructure challenging to industrialized and developing countries alike.