Central Mandates and Local Incentives: The Colombia Education Voucher Program

This study examines the incentives for municipalities and private schools to participate in a national voucher program. Cost-minimizing municipalities are predicted to participate when they have relatively few students who are under-served by existing public schools and when there is an elastic supply of private school spaces. Private schools are assumed to be monopolistically competitive with fees rising with service quality. Schools of moderate quality and tuition fee are predicted to participate with the greatest frequency, while schools with the lowest and highest fee levels are not expected to profit from the program and thus do not join. Empirical investigation using data on program participation by municipalities and schools strongly support the predictions of the participation models. These findings demonstrate that heterogeneity across municipalities and across private schools affect the degree to which vouchers increase enrollment and school quality for poor children. And when program participation among providers is voluntary rather than mandatory, empirical work that assumes that voucher students will receive schooling equal to the average quality of private schools will yield biased predictions. _______________ Acknowledgements We are grateful to Marybell Gutierrez, Martha Laverde, Carlos Pardo, Laura Rawlings, Carlos Torres, and Fabio Sanchez Torres for assistance in locating and accessing data and for helpful comments and suggestions at all stages of the analysis. Berk Ozler and Dan Levy provided expert assistance in organizing the data. Donna Otto prepared the manuscript. We also thank seminar participants at the Ministry of Education and the Department of National Planning of the Government of Colombia, and at the RAND Corporation and Iowa State University for their useful comments.