Description

I develop an empirical model to study the consequences of educational vouchers on markets’ equilibria. Unlike most related papers, I model both extensive and intensive margins of action for schools. I apply my model to Chile’s primary education, an industry that heavily subsidizes private schools through the use of vouchers. Results show that a correct understanding of the equilibrium consequences of vouchers necessitates accounting for both extensive (program participation) and intensive (fees) margins. I also find that the actual voucher program targeted to vulnerable students attracts mostly low-quality schools to serve low-income families. Alternative policy designs are proposed and tested.