Journal of Economic Literature 2017, 55(2), 441–492 https://doi.org/10.1257/jel.20150679

School Vouchers: A Survey of the Economics Literature†

Dennis Epple, Richard E. Romano, and Miguel Urquiola*

We review the theoretical, computational, and empirical research on school vouchers, with a focus on the latter. Our assessment is that the evidence to date is not suffcient to warrant recommending that vouchers be adopted on a widespread basis; however, multiple positive fndings support continued exploration. Specifcally, the empirical research on small-scale programs does not suggest that awarding students a voucher is a systematically reliable way to improve educational outcomes, and some detri- mental effects have been found. Nevertheless, in some settings, or for some subgroups or outcomes, vouchers can have a substantial positive effect on those who use them. Studies of large-scale voucher programs fnd student sorting as a result of their imple- mentation, although of varying magnitude. Evidence on both small-scale and large- scale programs suggests that competition induced by vouchers leads public schools to improve. Moreover, research is making progress on understanding how vouchers may be designed to limit adverse effects from sorting, while preserving positive effects related to competition. Finally, our sense is that work originating in a single case (e.g., a given country) or in a single research approach (e.g., experimental designs) will not provide a full understanding of voucher effects; fairly wide-ranging empirical and the- oretical work will be necessary to make progress. ( JEL H52, H75, I21, I22, I28, O15)

1. Introduction purposes of this review, we defne a voucher to be a government-supplied coupon that is n the past two decades, both research and used to offset tuition at an eligible private Iexperience have contributed to signif- school.1 Programs that distribute such vouch- cant progress in the understanding of edu- ers exhibit variation in dimensions including cational vouchers. We review both. For the course, these individuals bear no responsibility for errors or opinions herein. We thank Abby Linn for excellent * Epple: Carnegie Mellon University and NBER. research assistance. Epple and Romano thank the National Romano: University of Florida. Urquiola: Columbia Science Foundation and Romano thanks the Institute for University and NBER. We thank Roger Gordon for his Education Sciences for support. encouragement to undertake this paper, and Janet Currie † Go to https://doi.org/10.1257/jel.20150679 to visit the and Steven Durlauf for their invaluable support. We are article page and view author disclosure statement(s). indebted to Thomas Nechyba and four anonymous refer- 1 For other reviews and discussions see Ladd (2002), ees for their numerous comments. In addition, we received Neal (2002), McEwan (2004), Gill et al. (2007), Levin useful comments from Chelsea Coffn and Jesse Levin. Of (2008), and Rouse and Barrow (2009).

441 442 Journal of Economic Literature, Vol. LV (June 2017) who is eligible to receive them, their source 5. What political-economy factors deter- of funding, and the criteria for private-school mine the existence and design of participation. For example, vouchers are fre- voucher programs? quently “targeted” to low-income students, are sometimes funded privately rather than Research frequently focuses on more spe- through tax proceeds, and religious schools cifc questions that help to get at these may or may not be eligible to participate.2 fundamentals. The research that has analyzed these Our review begins by describing the issues programs seeks to answer fve fundamental and controversies that frame the research on questions: these questions (section 2). We set out the “for” and “against” positions typically (and 1. What effects do vouchers have on the at times informally) cited on vouchers. The students who use them? brief discussion is suffcient to show that the 2. Do vouchers induce nonrandom migra- answers to questions 1–5 can depend on both tion of students from public to private the characteristics of the program analyzed schools, possibly lowering the achieve- and the context into which it is introduced. ment of students that remain in the We then summarize the features of public sector via peer effects or other voucher programs that have been imple- channels? mented throughout the world (section 3). 3. Do voucher programs pressure pub- We make a distinction between two program lic schools to become more effcient, types. First, by small-scale programs, we increasing the achievement of students mean those that place signifcant restrictions that remain in the public sector? on who can receive vouchers. The most com- 4. What is the net effect of vouchers on mon restrictions involve income or geogra- aggregate educational performance? phy; for instance, vouchers may be made available only to low-income children in a given municipality within a country. Second, 2 This program heterogeneity poses a challenge in deter- by large-scale programs we mean those in mining which programs to classify as voucher programs. which vouchers are distributed countrywide From the perspective of this review, the most diffcult deci- sion regards whether to include charter schools under the with minimal restrictions on the type of chil- voucher umbrella. Most charter-school advocates would dren who can use them. strenuously resist classifying charter schools as voucher We then present a brief synopsis of the schools, pointing to state requirements that the former be chartered as public schools, subjected to the oversight of theoretical literature (section 4). It reveals the state-designated charter authorizer, and bound by con- that even in a qualitative sense, the answers straints on admissions and funding. The counterargument to questions 1–5 depend on voucher design. is that, in some states, charter schools can be privately owned and operate under constraints on admission and The main exception surrounds question 2, fnancing not markedly different from those imposed by where most models suggest that voucher sys- some of the more restrictive voucher programs. While tems will display a tendency towards strati- there is merit to both perspectives, we view the distinction fcation by ability and or income—although between charters and vouchers to be meaningful despite / the fuzzy boundary between the two, in part because all of this too can be mitigated by design and the voucher programs we review permit use of the voucher depends on context. in private schools. Moreover, there is tremendous hetero- geneity in charter school characteristics, both across and Finally, we turn to reviewing the empirical within states, making inclusion of charters in this review work—the focus of this survey (section 5). In unwieldy if not unmanageable. Hence, we have chosen terms of question 1, the empirical research not to include research on charter schools in this review. See Epple, Romano, and Zimmer (2017) for a review of does not suggest that awarding students a research on charter schools. voucher is a systematically reliable way to Epple, Romano, and Urquiola: School Vouchers 443 improve their educational outcomes. A per- For instance, the accumulated research has haps surprisingly large proportion of the begun to provide guidance regarding how most rigorous studies suggest that being voucher programs may be formulated to awarded a voucher has an effect that is sta- limit adverse effects related to sorting while tistically indistinguishable from zero. At the preserving achievement-enhancing effects same time, there is also evidence that in related to competition. Third, there is evi- some settings, or for some subgroups or spe- dence that the returns to a well-functioning cifc outcomes, vouchers can have a substan- education system can be large, with the asso- tial positive effect on those who use them. ciated implication that a good understanding In addition, however, some recent evidence of voucher design could be very useful. points to some discouragingly large negative A fnal note is that given the evidence we test score effects. In terms of question 3, have reviewed, our sense is that work orig- the literature generally suggests that com- inating in a single case (e.g., a given coun- petition from vouchers leads public schools try) or in a single research approach (e.g., to improve. That said, it also makes clear randomized-control trials) is unlikely to fully that it is very diffcult to isolate the effect of answer questions 1–5. The work on vouchers competition on public-sector value added suggests that educational markets are com- (the object of interest); this refects that as plex, and that therefore fairly wide ranging implied by the answer to question 2, vouchers empirical and theoretical work will be neces- typically lead to sorting and can thus affect sary to make progress. public schools through channels other than productivity enhancements. Taken together, 2. The Issues these fndings point to an ambiguous answer to question 4 regarding the net effect of To provide perspective for our review, we vouchers. Finally, empirical work fnds sup- begin with an overview of the types of issues port for theoretical predictions regarding the theoretical and empirical research on vouch- political economy of voucher adoption. ers must address. These issues are complex, Our “bottom line” assessment is that those in part because the effect of a voucher pro- hoping for defnitive answers to questions gram depends on both its design and the 1–5 will not fnd them in the research to institutional and economic setting in which date. In our view, the available answers to it is introduced. For instance, the effects these questions are insuffcient to warrant may depend on the size of the program and recommending that vouchers be adopted also on the alternative: What educational- on a widespread basis. In that respect, the provision regime would prevail without the effects of vouchers have been disappointing, voucher program? The “effects” that are of relative to early views on their promise. interest are themselves a fundamental issue. That said, our view is also that the record What is the social objective? defnitely warrants continued explora- To introduce these issues, we list some tion. This assessment refects three factors. classic claims that frame the voucher con- First and as stated, there is evidence that troversy—and virtually everything about in some cases vouchers can have signif- vouchers remains controversial—with- cant positive effects on educational perfor- out discussing any literature. This listing mance, or at least produce substantial cost will begin to illustrate the challenges that savings. Second, there is some indication research on vouchers faces, and our hope is that the prevalence of such results might be that the subsequent review will help to clarify increased with improved voucher design. what issues remain the most unsettled. We 444 Journal of Economic Literature, Vol. LV (June 2017) begin simply by stating some arguments for wherein quality rises with socioeco- and against vouchers, essentially as they are nomic status would be reduced. In short, commonly expressed. vouchers would provide both effciency The arguments in favor of vouchers and equity gains.5 include: The arguments against vouchers include: r

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categories such as race and religion choice, vouchers would increase access to quality education, especially for stu- dents at the low end of the socioeconomic 5 Additionally, a more philosophical argument for ladder. Stratifed educational provision vouchers rests on the substitution of student choice for public choice. As noted, the traditional economic version of this argument emphasizes better matching of prefer- ences to educational supply. The noneconomic version of 3 In our discussion, we will refer to the student and the the argument places value on freedom of choice per se, student’s household as just the “student.” while rejecting the paternalistic alternative. Since the liter- 4 If necessary, this could be supplemented with policies ature we review considers mainly economic outcomes and supporting educational loans. considerations, we abstract from such issues. Epple, Romano, and Urquiola: School Vouchers 445

promotes mutual understanding valu- Another crucial design feature of voucher able in a diverse society. programs regards the extent and character of r

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3. Voucher Programs districts have signifcant control over local schools. This has produced a large number This section describes the characteristics of small-scale voucher programs—about of existing voucher programs in a total of sixty-fve, by an admittedly rough count. We eight countries. Given space constraints, our do not discuss each in detail; rather we sum- aim is not to do full justice to the details of marize the characteristics of three types of these complex programs, but rather to pro- programs that vary according to how vouch- vide the reader with useful background and ers are funded: references that will be relevant in our review of the empirical literature. r

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GPVOEB- (e.g., only the central-city school district in tions. We summarize the typical char- a metropolitan area) or vouchers are tar- acteristics of about ffty in this class, geted based on individual characteristics highlighting those operated by the (e.g., only low-income children are eligible) Children’s Scholarship Fund (CSF). or based on school performance (e.g., only students in underperforming schools are eli- Distinguishing US programs by their source gible). Conversely, large-scale programs are of funding is for convenience. Nothing sug- those in which the distribution of vouchers gests that the source of funding per se will is largely unrestricted within the education infuence program effects, though some pro- market—all children in a country are eli- gram characteristics tend to vary by funding gible. A large-scale program need not, in source, as we discuss. We also provide fur- principle, be a nationwide program (e.g., a ther detail on some programs in our discus- voucher available to all students in the New sion of the empirical research in section 5.8 York metropolitan area would be a large pro- gram). In practice, however, all large-scale Tax- Revenue-Funded Programs.—Table 1 programs are nationwide. provides a summary of the main tax-funded 3.1 Small-Scale Programs We begin by describing the small-scale 8 These three categories do not include all small-scale programs in the United States, the country voucher-type public programs. Specifcally, since the that has produced the greatest number. This 1800s, Maine and Vermont have had programs that give section also describes small-scale programs students in sparsely populated areas an alternative to public provision. Students can use vouchers to attend a in Colombia and India. nonreligious private school. In Vermont, for example, the voucher is for the lesser of average public schooling costs 3.1.1 United States or tuition. In 2001–02 there were 90 “tuitioning towns” as they are called, with 7,147 students participating. There The United States has a highly decentral- are also programs that target special-needs students that, ized education system in which states and in the interest of space, we do not discuss here. Epple, Romano, and Urquiola: School Vouchers 447 Yes Yes Yes 2013 2004– criteria admission metro/bus Pvt school 52 in 2012 food stamps Below 300% K–8: $8,256; poverty or on 3,105 in 2012 used to pay for HS: $12,385 in Voucher can be Voucher Washington, DC Washington, No No Yes Yes 2008– criteria poverty about 130 admission Pvt school in 2011/12 8,000 2013 New Orleans Below 250% of $7,617 maximum $7,617 K–8, Yes Yes Yes 2011– school higher Indiana criteria admission Pvt school HS slightly 280 in 2013 Below 150% Up to school 3,919 in 2011 $4,700 for poverty or failing

Yes Yes Yes Ohio 2005– public criteria poverty admission Pvt school HS: $5,000 305 in 2009 K–8: $4,250; 12,685 in 2009 Yes, above 200% Yes, Underperforming rograms P

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Lottery 2011/12 $4,600 in (cap 500) 23 in 2013 1 494 in 2011 oucher All students Douglas, CO US V ABLE T Yes Yes Yes unded 1995– income Lottery poverty Cleveland F 35 in 2012 HS: $5,000 Open to all, K–8: $4,250; K–8: No. HS: 6,300 in 2009 priority to low

Yes above 200% Yes ublicly P Yes Yes Florida Lottery poverty school in 32 in 2012 1999–2006 HS: $5,000 K–8: $4,250; K–8: No. HS: 3,649 in 2012 Yes if voucher Yes Failing school

Yes above 200% Yes student’s district student’s Yes Yes 2011– Racine Lottery poverty 2013/14 routinely $6,442 in Some, not 13 in 2013 520 in 2012 Below 300% K–8: No. HS:

poverty 2013– Yes above 220% Yes 2006 1990– Lottery poverty poverty 2012/13 routinely $6,442 in Some, not Milwaukee 112 in 2012 Below 300% K–8: No. HS: Yes beginning Yes

Yes since 1998 Yes 24,027 in 2012 Yes above 220% Yes achievement exams as in public schools? be used at religious schools? supplement be required? provided student participating private schools oversubscribed pvt schools Same Can vouchers Can tuition Transportation Transportation Funding per Number of Enrollment Years of program Years

Targeting Admission to 448 Journal of Economic Literature, Vol. LV (June 2017) voucher programs in the United States.9 All in 1998, with students enrolled in religious of these programs apply for grades K–12, schools retaining the right to opt out of and almost all are targeted to students in religious instruction. The voucher pays the low-income households or schools desig- lesser of tuition at a private school and the nated as underperforming. Programs vary standard district allocation, $6,442 in 2010. in age, ranging from Milwaukee, which Initially, schools could not charge additional started in 1990, to New Orleans, which tuition. Beginning in 2011, high schools were started in 2008. Programs also vary substan- permitted to charge additional tuition to eli- tially in the number of students receiving gible students above 220 percent of the pov- vouchers. Several programs require that erty line. Transportation is provided by the oversubscribed voucher schools choose district if the student is within a set atten- students by lottery. Others permit private dance area. Participating private schools set schools to apply the same admission crite- the number of available slots for voucher stu- ria for voucher as for non-voucher students. dents, and must accept all students, conduct- Funding per student varies across programs, ing a lottery if oversubscribed. They must but most provide suffcient resources to also be accredited by one of several agencies. attract participation of a substantial number Private schools must also meet at least one of of private schools. Vouchers may be used in the following four performance standards:10 religious schools in all of these programs. (1) at least 70 percent of voucher-supported All now require that voucher recipients take students must advance a grade level, (2) fre- the same standardized examinations as pub- quency of attendance by voucher stu- lic school students. While not detailed in dents must be at least 90 percent, (3) at the table, all programs require participating least 80 percent of program students must schools to meet curricular and other criteria. demonstrate signifcant academic progress, Some programs (e.g., Milwaukee) require or (4) at least 70 percent of voucher-student schools to be pre-accredited by an approved families must meet parental involvement cri- national agency; some (e.g., Ohio) require teria set by the school. that schools obtain a state charter, and oth- The income threshold for eligibility has ers require annual reporting to an oversight been on an upward trend. It was raised from body. the initial 175 percent of the federal poverty Milwaukee is in many respects the most level to 220 percent in 2005, and 300 percent important voucher program in the United more recently. This allowed the program’s States and has served as a model for others; coverage to grow. In 2004 it distributed it therefore merits additional discussion. The about 24,000 vouchers, accounting for about Milwaukee Parental Choice Program was 23 percent of total district enrollments. By introduced in 1990 in the Milwaukee school 2002, 102 private schools were participating, district, targeting K–12 students with house- including 26 schools reported as entering as hold income not exceeding 175 percent of a result of the voucher program (Chudgar, the federal poverty level. At its inception, Adamson, and Carnoy 2007). the program was not available to students attending religious schools. That changed Tax-Credit-Funded Programs.—We next turn to tax-credit-funded voucher programs,

9 Though we discuss programs in the present tense, the Florida program described in table 1, known as the Florida Opportunity Scholarship Program (FOSP), was declared 10 Wisconsin Administrative Code, chapter PI 35, unconstitutional and suspended in 2006. p. 117. Epple, Romano, and Urquiola: School Vouchers 449 summarized in table 2.11 The operation and sponsoring organization is the CSF, and a funding of one of the earliest, the Florida brief description of its operation illustrates Corporate Income Tax Credit Scholarship key characteristics of this type of program. Program (FTC), illustrates similarities and The CSF received a founding contribution differences between these programs and from the Walton Family Foundation and the tax-funded programs summarized in has provided vouchers to low-income stu- table 1. The FTC was established in 2001 dents in numerous municipalities includ- and is fnanced by corporate contributions, ing New York City, Charlotte, Dayton, for which donors get a 100 percent corporate Baltimore, and Washington, DC. In 1999, income tax credit for contributions that do it received 1.25 million applicants for not exceed 75 percent of their tax liability. 40,000 vouchers. Total contributions are capped at 88 million Its Baltimore program is typical. It tar- dollars, currently. Vouchers are for free- or gets low-income students in grades K–8. In reduced-lunch students and the program is 2008, it distributed vouchers to 490 students administered by approved nonproft agen- attending 70 private schools, 64 of which were cies. In 2012, the FTC awarded about 51,000 religious. The average voucher was $1,759 vouchers to students attending about 1,300 and the maximum was $2,000. Families are schools. This makes it the largest voucher required to pay at least $500 themselves, program in the United States—roughly twice and their average payment was $2,711. All the size of Milwaukee, although relative to a privately funded programs of which we are much larger population. aware are similarly targeted, typically by As shown in table 2, the average voucher per income, and some to racial ethnic groups. / student among tax-credit-funded programs Some also target students that are identifed was $4,335 in the 2012 school year. Private as having high academic potential but lim- schools may impose their own admission poli- ited means. cies, restricted only by antidiscrimination stat- 3.1.2 Colombia13 utes, and can charge tuition in addition to the voucher, so long as this is their normal policy. Small-scale voucher programs are much less common outside the United States, but Privately Funded Programs.—Roughly Colombia provided a salient, if short-lived, ffty privately funded voucher programs example. Specifcally, in 1992 it began oper- also exist in the United States.12 The largest ating the PACES secondary-school voucher program.14 This initiative was launched to increase secondary-school enrollment—the 11 The tax-credit-funded programs detailed in table 2 intent was for private participation to help are to be distinguished from state income tax credit and deduction programs available to households for educa- ease public-sector capacity constraints. The tional expenses that currently exist in Arizona, Minnesota, vouchers, which were renewable contingent Illinois, and Louisiana. Given restrictions on amounts, on grade completion, were targeted at eligibility, and state income taxation, these programs have limited effects. For example, the most recently passed pro- entering students who were: (1) residing in gram in Louisiana in 2008 allows taxpayers to deduct from the state income tax 50 percent of educational expenses, up to the minimum of $5,000 per child or the total tax- able income of the individual. With the maximum marginal 13 For further reference see King et al. (1997), King income tax of 6 percent in Louisiana, the maximum sub- et al. (1998), and Angrist et al. (2002), on which this dis- sidy to educational expenditure is below $300. cussion is based. 12 This calculation counts separately programs in dif- 14 PACES stands for Programa de Ampliación de ferent municipalities that are administered by the same Cobertura de la Educación Secundaria—program for organization. increasing secondary school enrollment. 450 Journal of Economic Literature, Vol. LV (June 2017) 2012–13 2012–13 No Yes Yes 2006– 2012–13 poverty level. Rhode Island 54 in Below 250% of 382 in $2,690 average in 2011–12 2012–13 No Yes Yes 2001– Below 2011–12 poverty level. Pennsylvania public school. 400 in $75,000 and in $990 average in

underperforming 45,100 in No Yes Yes N/A N/A 2013– Oklahoma Up to $5,000 public school. Below 300% of underperforming poverty level or in rograms P 2011–12 2011–12 2011–12 No Yes Yes Iowa 2006– poverty

oucher 2 Below 300% of 154 in V 10,600 in $1,031 in ABLE T inanced 2012–13 -F Yes Yes Yes N/A 2009– Indiana 2012–13 redit public school. Below 200% of $880 average in 2,890 in underperforming -C poverty level or in ax T 2011–12 No Yes Yes N/A 2008– Georgia students 2011–12 All public-school $3,388 average in 13,285 in 2012–13 2012–13 Yes Yes Yes 2001– Florida 2012–13 poverty level Below 230% of 1,330 in $4,335 average in 51,023 in Tax credits to businesses are generally limited as is the statewide total credit and amount available to provide vouchers to eligible students. Lotteries are Lotteries students. eligible to vouchers provide to available amount and credit total statewide the is as limited generally are businesses to credits Tax achievement exams as in public schools? used at religious private schools? student supplement be required? participating private schools Notes: then generally used to provide vouchers applicants. The poverty level for eligibility is measured by the federal Same Can vouchers be Funding per Can tuition Enrollment Number of Years of program Years Targeting Epple, Romano, and Urquiola: School Vouchers 451

low-income neighborhoods,15 (2) attending 3.1.3 India17 public school, and (3) accepted at a partic- ipating private school. India provides an interesting example The initiative was implemented at the of a small-scale voucher experiment that, municipal level, with the national govern- like many in the United States, is privately ment covering about 80 percent of its cost funded. Specifcally, in 2008 the Azim Premji and municipalities contributing the remain- Foundation began distributing vouchers in der. Resource constraints at both govern- fve districts of the state of Andhra Pradesh, mental levels resulted in excess demand in focusing on 180 villages that each contained most jurisdictions. When this happened, at least one legally operating private school. the vouchers were generally allocated by Baseline tests were conducted at all private lottery.16 and public schools in these villages. The voucher covered registration and tui- All the test takers in public schools were tion payments up to a maximum. Specifcally, then invited to apply for vouchers, with the its value increased with schools’ fees up to knowledge that these would be allocated ran- about $150 dollars per year. Angrist et al. domly. Students and parents were informed (2002) note this was roughly equivalent that the vouchers would cover all school fees to the cost of a low-to-mid priced private and materials (e.g., textbooks, uniforms, school, and that it was common for recipients shoes), but not transportation costs. Students to supplement this amount. At the program’s in public schools are typically of lower socio- inception, any private school authorized to economic status, and many found this offer operate by the Ministry of Education could attractive. take vouchers, although more expensive Private schools were given the option schools generally did not. Starting in 1996, to join the program, with the understand- and following well-publicized reports of per- ing that the value of the voucher would be ceived low quality at specifc private schools, paid directly to them and was equivalent participation was restricted to not-for-pro ft to about the 90th percentile of the distri- institutions. bution of all private-school fees in the 180 By 1995, the year of peak activity, about villages.18 In joining, private schools had to 90,000 students were using vouchers to specify how many slots they would make attend roughly 1,800 private voucher available for voucher recipients. The main schools. These students accounted for about condition placed upon these schools related 1 percent of all secondary-level enrollments to non-selection. If space permitted, they in Colombia (King et al. 1997). Subsequent would have to admit all voucher winners; if declines refected funding constraints that they were oversubscribed, they had to enroll cut both the number of vouchers and their those selected via a lottery run by the funder. maximum value. The program was discontin- This program featured a unique random- ued in 1997. ization, which took place in two stages. First, ninety villages were randomly selected to

15 Colombia had a scheme by which neighborhoods were classifed into six strata depending on income; 17 This discussion is based on Muralidharan and only children in the two poorest strata were eligible for Sundararaman (2015). vouchers. 18 The full voucher amount is paid directly to the school, 16 Angrist et al. (2002) present evidence consistent with which is in charge of distributing uniforms, textbooks, and these lotteries generating random allocation in the cities of other materials. Muralidharan and Sundararaman (2015) Bogota and Cali, and use this to evaluate PACES, as dis- state that this arrangement refects common practice cussed herein. among private schools in India. 452 Journal of Economic Literature, Vol. LV (June 2017)

TABLE 3 International Voucher Programs

Restrictions on private/independent schools

Enrollments in private or independent For-proft Selective Religious Signifcant Years in voucher-funded operation admissions affliation tuition charges Country operation schools allowed allowed allowed allowed

Chile 1981– 47% Yes Yes Yes Yes

Denmark 1855– 12% No Yes Yes Yes

Holland 1917– 70% No Yes Yes No

New Zealand 1989– 15% Yes Yes Yes No

Sweden early 1990s– 10% Yes No Yes No

receive vouchers, and ninety remained in 3.2.1 Chile19 a control group. Second, within the ninety treatment villages, about 3,000 households In 1981, Chile introduced a universal applied for vouchers. About 2,000 were ran- voucher scheme. Prior to this reform, three domly selected to receive them, and about types of schools were in operation: (1) pub- 1,200 of these actually used them. As we will lic schools were managed by the national discuss below, this double randomization has Ministry of Education and accounted analytic advantages. for about 80 percent of enrollments; (2) unsubsidized private schools catered to 3.2. Large-Scale Programs upper-income households, and accounted We now turn to describing large-scale pro- for about 6 percent of enrollments; and grams. The fact that they distribute vouch- (3) subsidized private schools did not charge ers without targeting implies that these have tuition, received limited lump-sum subsi- the potential to have a greater effect on dies, were often Catholic, and accounted for educational markets, although this impact roughly 14 percent of enrollments. ultimately depends on their design and the The 1981 reform had two main compo- context into which they are introduced. nents. First, it transferred public-school Table 3 summarizes fve cases we consider, management to municipalities, simultane- highlighting variation in the percentage of ously awarding them a per-student subsidy enrollments at independent schools and suffcient to cover their costs. Second, subsi- whether these schools can operate for proft, dized (or “voucher”) private schools began to implement selective admissions policies, receive exactly the same per-student subsidy have a religious affliation, and charge tui- tion above the voucher. The remainder of 19 For further background see Gauri (1998), McEwan this section discusses these on a case-by-case and Carnoy (2000), Mizala and Romaguera (2000), Hsieh basis. and Urquiola (2006), and Mizala and Urquiola (2013). Epple, Romano, and Urquiola: School Vouchers 453 as municipal schools. These changes resulted protests. The current Bachelet administra- in substantial private-school entry. By 2009, tion has submitted to congress a proposal about 57 percent of all students attended with three main ingredients: (1) the elimi- private schools, with voucher schools alone nation of tuition top-ups, (2) the end of the accounting for about 50 percent.20 ability of private voucher schools to operate Chile’s scheme imposes few restrictions on for proft, and (3) the introduction of a sig- private schools. These can receive voucher nifcant reduction of the ability of private subsidies regardless of their religious status schools to select students. The proposals and operate for proft. They are allowed to are still under discussion, and the details of implement admissions policies subject to implementation remain to be seen. few restrictions and, as of 1994, can charge 3.2.2 Denmark24 tuition add-ons.21 The latter are capped at about four times the voucher payment, but Denmark has a long tradition of subsi- this constraint rarely binds.22 Public schools dizing independent schools. Since the Free operate under more restrictions. They are School Act of 1855, it has allowed parents not allowed to turn away students unless and organizations to set up independent oversubscribed, and cannot charge tuition schools to which any child can apply, and at the primary level. All schools must imple- which are allowed to have religious afflia- ment elements of a national curriculum and tions. Historically, these schools were funded participate in annual standardized exams, through a scheme by which the State reim- the results of which have been public since bursed a large portion of their expenses. the 1990s.23 In 1992, this system was replaced with one Recent years have seen further reforms. that provides independent schools with a Since 1997, schools charging tuition add-ons grant based on the number of pupils enrolled are required to provide exemptions on these by a certain date. Public schools continue to for a percentage of low-income students. be fnanced by a combination of national and In 2008, the fat voucher became differen- local government allocations; they do not tiated: it was increased for low-income stu- receive per-student payments. dents. However, not all schools receive these The voucher-type payment for indepen- additional subsidies, as they have to comply dent schools is indexed to expenditures in with a number of conditions to receive them. public schools and varies with two factors: Even further signifcant reforms to the school size (with higher payments for smaller voucher system are under active discus- schools, to account for economies of scale) sion, in part in reaction to persistent student and the age distribution of students and teachers. These payments cover only about 20 The “elite” unsubsidized private schools continued to 80 percent of average educational costs, and account for about 6 percent of enrollments. independent schools are therefore allowed 21 Over the years, education-related legislation often to charge tuition (low-income households mentions that private schools should not select students. The anecdotal evidence indicates that this rarely binds— can apply for waivers) or seek external grants for instance no admissions lotteries are required. We to cover the remainder. Despite this, total return to this issue below. per-pupil expenditures are slightly lower in 22 Most of the “elite” unsubsidized private schools could take vouchers but choose not to; see Urquiola and Verhoogen (2009). 23 These tests have been used for purposes of account- ability and targeting. For instance, Chay, McEwan, and Urquiola (2005) consider a program that targeted the 900 24 For further discussion see Justesen (2002), on which worst-performing schools in the country. this discussion is based. 454 Journal of Economic Literature, Vol. LV (June 2017) the independent-school sector.25 By 2005 admission for various reasons, including reli- independent schools accounted for about gious affliation. 12 percent of enrollments. They operate 3.2.4 New Zealand 27 subject to nationwide collective agree- ments with teachers, and to basic curricu- In 1989, New Zealand implemented a lar requirements that leave them relatively decentralization initiative transferring con- broad pedagogical autonomy. trol of each public school from a national department of education to a “Board of 3.2.3 Holland26 Trustees”—largely consisting of parents— The Dutch 1848 constitution allows for elected locally. In 1991, this system was churches, foundations, and parental associ- extended by granting per-pupil funding to ations to set up independent school boards all schools, including independent and “inte- that operate schools to which any child can grated” institutions. The latter are schools apply. The 1917 constitution further includes which, while being institutionally indepen- commitments of equal fnancial support for dent, had been affliated with the public sys- public and independent schools. While both tem since the 1970s; most, though not all, types of schools receive funds for infrastruc- have a religious affliation. At present, the ture, a substantial part of schools’ support is enrollment shares of public, integrated, and in the form of a per-pupil grant, with greater independent schools are 85, 11, and 4 per- payments when they enroll children of low cent respectively. socioeconomic status. These arrangements put in place a key While this system was initially set up to ingredient of a voucher system—schools that allow for transfers to Catholic and Protestant attract more students receive greater fund- schools, at present it also covers schools with ing. That said, they depart from the textbook other religious affliations. Nevertheless, a voucher in some ways. First, not all schools majority of independent schools still identify receive the same per-student funding. Public as Protestant or Catholic, with enrollment schools receive subsidies for teacher sala- shares of 27 and 29 percent, respectively. ries, operational costs, and capital expenses; The public sector’s share is 35 percent, integrated schools are only compensated for with the remaining 9 percent of children in teacher salaries and operational costs; and schools of other types. Independent schools independent schools receive only a portion must be run on a not-for-pro ft basis and of the per-student payments awarded to “top-up” tuition charges are not allowed. integrated schools (the percentage has fuc- In addition, these schools must implement tuated around 30 percent over the years). at least parts of a core national curriculum, Second, public and integrated schools do not participate in national standardized exams, have control over teacher pay; pay scales are and comply with regulations regarding centrally determined for all but the indepen- aspects like class size, teacher qualifcations, dent schools. and minimum enrollments. Private schools In addition, while public schools may implement selection policies and may deny supplement their central subsidies via fund- raising activities and donations, they are not 25 Justesen (2002) indicates that in the aggregate, 77 allowed to charge mandatory fees. Integrated percent of independent schools’ resources come from schools are allowed to collect donations and voucher-type payments, 18 percent from user fees, and the remaining 5 percent from other external sources. 26 For further reference, see Justesen (2002), Patrinos 27 This description is based on Ladd and Fiske (2001); (2002), and Levin (2004), on which this discussion is based. Adams (2009); and Lubienski, Lee, and Gordon (2013). Epple, Romano, and Urquiola: School Vouchers 455 charge compulsory “attendance dues” to outcomes continued to be constrained by meet capital costs. Independent schools can agreements at the national level.29 Third, charge fees. “open enrollment” plans were instituted at The 1991 legislation allowed all schools the municipal level, such that, in principle, wide latitude in setting up admissions pro- students could attend any school in their cedures. For example, admissions policies jurisdiction; in practice, distance to school could specify a catchment area, sibling continued to be a criterion for admission. preferences, and the use of parental inter- Fourth, independent schools were given the views. Lubienski, Lee, and Gordon (2013) right to receive municipal funding as well— point out that some restrictions on selec- the government mandated that municipali- tion were implemented in the 1990s. These ties fund them with a per-student payment mainly related to transparency in stating the equivalent to the resources they would have selection criteria and the specifcation of spent themselves. In practice, these pay- catchment areas (there had been objections ments equal about 80 percent of per-student around the fact that children living very close costs at municipal schools.30 to a given school might not gain access to it). Independent schools must be approved by Nevertheless, schools retain wide latitude in the National Agency for Education. While selecting students. municipalities can raise objections regarding specifc institutions that apply for approval, 3.2.5 Sweden28 they do not have veto power. Independent Prior to the early 1990s, almost all Swedish schools may be operated on a for-pro ft or children (about 99 percent) attended munic- nonproft basis, they can be religious or sec- ipal schools. While controlled by local juris- ular, and they can focus on specifc ethnic dictions, municipal schools were funded groups or languages. In all cases, however, by earmarked transfers originating in the independent schools must be open to all national government, which also directly students—regardless of their municipality hired teachers. Beginning in 1991, these of origin, ethnicity, or religion—and they arrangements underwent reforms that had cannot charge tuition beyond the voucher. four main components. First, the govern- Further, grades cannot be used as admissions ment turned the earmarked funds into criteria at the compulsory level. Instead, largely lump-sum subsidies, with munici- proximity to the school, wait list ( frst-come, palities gaining latitude in fnancial man- frst-served), and sibling presence at a school agement. Second, municipalities became determine priority. Ability-based admissions teachers’ offcial employers, obtaining are allowed at the secondary level. Top-up the ability to negotiate pay and terminate funding is not permitted. Ownership of a employment. Through 1996, however, the school is unrestricted, and hence can be reli- national government largely fxed teacher gious, for-proft, or nonproft. pay as a function of credentials and expe- rience (Hensvik 2012). Beginning in 1996, salaries were determined by negotiation at 29 There were two fve-year agreements between the the local level. Although these negotiations central government and the teachers’ union. The frst raised teacher pay by 10 percent over fve years and the allowed for greater pay differentials, their second, beginning in 2000, by 20 percent. Hence, local negotiations were constrained by minimum-pay require- ments set at the national level. 28 For further reference see Sandstrom and Bergstrom 30 Further, if a student crosses municipal lines, the (2005) and Bohlmark and Lindahl (2007), on which this locality losing him has to make a similar transfer to the discussion is based. municipality that accommodates the student. 456 Journal of Economic Literature, Vol. LV (June 2017)

Bohlmark and Lindahl (2012) point (p. 89). Implicit in this government role out that there was relatively little voucher would be assurance that voucher funds be school entry through 1998; at that point, the spent on education. Friedman argued that independent-school share began to grow. By competition for students would induce 2004, the independent-school enrollment schools to operate effciently and reward rate reached 10 percent for high schools and quality teaching, with effective schools 6 percent for primary and lower secondary. establishing good reputations. The poor By 2009, independent schools accounted for would have educational choices not bound roughly 10 percent of all students. The rea- by the residence restrictions embodied in sons for the relative lack of voucher school neighborhood public school systems. In entry for the frst several years are unclear. Friedman’s view, the education environment These could include anything from a lack was not suffciently different from other of information or risk aversion on the part market settings to interfere signifcantly with of parents, to the fact that the 1996 relax- effective functioning of such a marketplace ation of centralized wage setting might have for education. allowed independent schools to compete More recent research has modeled edu- more effectively. cational vouchers taking account of distinc- tive features of the education environment. Table 4 provides a summary of the charac- 4. Theory teristics of models that we discuss in this In this review, our primary emphasis is section. The delineation of model charac- on empirical research (a comprehensive teristics in table 4 is imperfect and does not, review of theoretical and computational of course, fully describe differences across research is provided by Epple and Romano papers. For example, the table indicates 2012). Nonetheless, this section provides a whether the vouchers that are studied are brief summary of the theoretical literature targeted, but does not indicate the type of with an emphasis on empirical and policy targeting, which varies in important ways implications. across studies. Likewise, there are import- The case for a market-based educational ant differences in what makes public schools voucher was laid out by Milton Friedman heterogeneous in the models that have such (1962), who provided a vision for voucher differentiation. In the discussion below, design and an enumeration of the benefts these modelling differences are highlighted. that he foresaw from voucher adoption. He In reviewing this recent literature, we make supported public funding of education on reference to how it helps to address the fve the grounds that such funding was warranted fundamental questions on vouchers that we by the social externalities fowing from an set out in section 1. educated population and due to borrowing A central theme that emerges is that constraints, but argued that public fund- the answers to these questions depend on ing need not imply public provision. He voucher design. Regarding question 2, vir- envisioned a system in which parents could tually all theoretical analyses predict that choose a school for their child with public a laissez-faire design will induce “cream funding going to the chosen school. The role skimming,” with the associated implication of government would be to provide funding for question 1 that some students will gain while “… insuring that schools meet certain more than others; and some will be made minimum standards, such as inclusion of worse off unless the effects on public-school minimum common content in programs…” performance (question 3) are substantial. Epple, Romano, and Urquiola: School Vouchers 457 X X X X X X Voucher X X X X X X Public choice X X X Public expenditure X X X X X market Housing X X price Private discriminate X X Limit admissions up X X No topping ouchers V Vouchers X X X X X X X X X X X of

Targeted odels X X X X X X X X X X X X X X X M Universal

X TABLE 4 TABLE observed Imperfectly heoretical T X X X X X X X X X X X of

Aptitude Student differentiation X X X X X X X X X X X X X X X X X X X X Income X X X X X Rent haracteristics seeking C - X X X X X neous Heteroge Public schools - X X X X X X X X X X X X X X X X neous Homoge X X X X X X X X quality indirectly Peers affect Sarpca (2014) (2014) Rogerson (2003) (1996) (2012) (2008) (2009) (1998) Epple, Romano, and Bearse et al. (2009) Epple and Romano Fernandez and Chen and West (2000) Chen and West Hoyt and Lee (1998) Public-choice models Ireland (1990) Epple and Romano Nielson (2013) Chakrabarti (2013d) Ferrerya and Liang Chakrabarti (2013c) Epple and Romano Macleod and Urquiola McMillan (2005) Ferrerya (2007) Nechyba (2003) Nechyba (2000) Voucher models Voucher Manski (1991) Epple and Romano Nechyba (1999) 458 Journal of Economic Literature, Vol. LV (June 2017)

Theoretical models are often paired with for educational quality rising with income a computational counterpart to quantify and motivation; a positive peer externality magnitudes, distributional effects, and, from highly motivated students; educational with respect to question 4, net impacts. As quality determined by expenditure per stu- problematic implications of the laissez-faire dent and peer quality; analysis of alternative design have become better understood, public-sector objectives including rent seek- research has increasingly emphasized ways ing; and zero-proft private schools that set in which benefts from voucher-induced tuition to maximize enrollments with tuition competition can be obtained without adverse and a voucher spent on educational inputs.31 distributional effects. While the natural Manski uses this setup to assess if vouchers focus with regard to question 1 is on educa- would induce changes that equalized edu- tional outcomes, theory has also developed cational opportunity. The simulations and interesting implications regarding impacts outcomes he considers are numerous, but on residential choice and housing values, and overall the conclusion is that vouchers are the connection to voucher design. Regarding not a “panacea.” A key prediction is that, as question 3, theoretical research has iden- the voucher level rises, the fraction of highly tifed potential sources of effciency gains motivated students in the public schools from educational competition, as well as tends to fall, especially in poor communities. ways that public-school performance might He states that “even in the most favorable be adversely affected. Failures of voucher case, a systemic choice system would not proposals at the ballot box have motivated come close to equalizing educational oppor- research addressing question 5. tunity across income groups.” Thus, Manski’s analysis predicts that cream skimming of the 4.1 The Effects of Vouchers sort raised in question 2 will adversely affect The theoretical and computational litera- less-motivated students. ture typically begins from a characterization Epple and Romano (1998) study private- of the educational environment, while taking and public-school competition when stu- the existence and characteristics of vouch- dents vary in ability and household income, ers as exogenous. The question then is how and school quality increases with peer abil- the introduction of a given voucher program ity. Private schools maximize profts and into a school “market” affects school effec- can price discriminate, i.e., charge tuition tiveness, the distribution of outcomes and that varies with student ability and income. welfare across students, the distribution of Schools have fxed costs, as well as variable students across schools, tax revenues, public- costs that are an increasing convex function of school expenditures, residences, and prop- enrollment, i.e., cost per student is U-shaped erty values. In our discussion below, we draw in enrollment. The model gives rise to the out the predictions of theoretical models, following predictions. First, because school while also noting those that have not yet quality increases with peer ability, private received empirical testing. schools charge lower tuitions (i.e., provide Manski (1992) pioneered this type of approach developing a theoretical and com- 31 While Manski describes students as varying in motiva- putational model that captures features of the tion, we label such variation as “aptitude” in table 4. Many educational environment including: public authors describe students as varying in ability, and we have and private sectors between which students just chosen one term in the table to describe student vari- ation along these lines. Note, too, that Manski considers can choose; students differing by house- rent-seeking public schools as we indicate in table 4, but hold income and motivation, with demand also other objectives. Epple, Romano, and Urquiola: School Vouchers 459 more fnancial aid) for high-ability students. serving the relatively more able and affu- Second, higher-income households with ent, lower-achieving voucher schools serving low-ability students pay a tuition premium to the relatively less able and affuent, and a enable their children to attend high-quality public-school sector with lower achievement schools. Thus, the school system will have still. Epple and Romano (2008) extend this a general tendency towards stratifcation setup to show that these properties persist in two respects. There will be stratifcation when school quality depends on expenditure across schools within the private-school sec- per student in addition to peer quality.33 tor and there will be stratifcation between Could all students nonetheless have the public and private sectors. Moreover, improved educational outcomes with the private schools will be differentiated in voucher? If private schools have an educa- quality and will exhibit “diagonal stratif- tional approach that is suffciently superior to cation,” with each private school having a that of the public schools they supplant, and student body that is a “diagonal slice” in the if the remaining public schools are induced income–ability plane. The lowest-income by competition to adopt a superior delivery and lowest-ability students will attend public approach, all students might have higher schools. Thus, the model predicts that there achievement than in the no-voucher equilib- will be a higher correlation between income rium. Computational analysis calibrated to and ability in public than in private schools.32 the US context suggests, however, that some The model predicts that introduction of students will beneft from the voucher—the a universal ( fat-rate) voucher will induce comparatively more able and affuent—while additional private schools to enter, with each others—the comparatively less able and entering school being of lower quality than affuent—will be hurt. Regarding question 4, the preceding entrant, and each exhibiting the effect on normed aggregate achievement the diagonal-stratifcation pattern. As the (equal to future earnings) may be positive or amount of the voucher increases, average negative depending on the extent to which peer quality in the public schools is pre- private-school education delivery is more dicted to decline as private entrants “cream effective than preexisting public schools, and skim” higher-income and higher-ability the extent to which public schools upgrade students from the public schools. If a com- delivery in response to competition. In paratively low voucher is introduced, those summary, the model yields unambiguous pre- switching to private schools will attend a dictions about stratifcation, private-school school with higher peer quality than the pricing, and relative achievement across the public-sector school they depart. As the predicted school hierarchy, while predicted voucher level is increased, however, stu- aggregate effects depend on the impact of dents who are induced to switch to private vouchers on educational effectiveness. It school exit a public-school sector whose peer quality has been diminished by cream 33 One additional fnding is that low-quality “bottom skimming to a private school with compar- feeder” schools may enter when vouchers are available, atively low peer quality. Thus, regarding providing fnancial aid “kickbacks” to induce low-income questions 1 and 3, the model predicts that households to choose low-quality schools. It is shown that this can be prevented by a mandate that the voucher be there will be high-achieving voucher schools spent on education. Theoretical models have generally assumed that kickbacks are not allowed. The incentive to kickback monies to poor students raises the related ques- 32 These and other predictions of the model are tested tion as to whether vouchers would lead schools to pro- in Epple, Figlio, and Romano (2004) and are found to be vide noneducational goods to students as a way around a supported by the data. requirement to spend all of a voucher on education. 460 Journal of Economic Literature, Vol. LV (June 2017) bears emphasis that these predictions are Relative to the design of Epple and Romano for a universal ( fat-rate) voucher design, the (2008), the absence of enhanced voucher Chilean voucher (at least in roughly its frst funding for low-ability students reduces two and a half decades) being perhaps the incentives for schools to seek out and retain closest observed counterpart. less able students. Epple and Romano (2008) also investigate Nechyba (1999, 2000, 2003) analyzes the the implications of voucher design for cream effects of voucher programs in multi-district skimming, showing that an ability-targeted local economies. He develops a rich theoret- and tuition-constrained voucher can preserve ical and computational model to investigate effciency benefts from competition while the effect of several voucher programs under eliminating cream skimming and providing alternative public-school fnancing schemes. relatively uniform benefts across the distri- He demonstrates the importance of house- bution of student income and ability types. hold mobility and general equilibrium effects The tuition constraint disallows “top-ups” in predicting outcomes from large-scale and “kickbacks.” Such an ability-targeted voucher programs. In his 1999 framework, design has not been implemented in prac- there are multiple local school districts, a tice.34 Voucher designs requiring that fxed stock of heterogeneous housing units, oversubscribed schools select by lottery neighborhoods within districts differentiated and that all school funds be spent on edu- by housing quality, district-wide homoge- cation, coupled with a prohibition against neous public schools, perceived education topping up, may be the nearest operational quality that varies with expenditure per stu- counterpart. Chakrabarti (2013b) provides a dent and average peer quality, and peer qual- model of such a voucher and tests the sort- ity that is correlated with household income. ing predictions, as discussed in section 5.3.35 Tuition varies across private schools, but, in contrast to Epple and Romano (1998, 2008), price discrimination is not permitted, imply- 34 In related work, Eden (1994) examines effcient voucher policy in a model with peer effects within schools ing each private school is specialized to serve and an achievement externality to society. Education is one student type. This and the willingness a pure investment good and capital markets are (implic- of higher-income households to pay a pre- itly) perfect. He shows that an achievement subsidy aligns school and social incentives, and combined with a mium for quality results in stratifcation by type-dependent voucher equal to the effcient expenditure peer ability and income in the private sector. plus the student’s peer externality cost induces an effcient Households simultaneously choose where to ( zero-proft) equilibrium in which students pay nothing out of pocket. live (district and neighborhood), whether to 35 Chakrabarti (2013b) assumes students differ continu- send their child to public or private school, ously in income and ability, with demand for school quality and vote for a district-wide property tax increasing in both. School quality is equated to expendi- ture per student, with a maximum quality. She considers a used to fnance public schools. Nechyba voucher that, for simplicity, covers the highest-quality cost conducts policy analysis in a computational of education, effectively implying no topping up. Neither can private schools kick back any of the voucher. Private schools have no incentive to base admissions on ability types value quality by more and there are utility costs of due to an absence of peer effects, as with a voucher that applying. The latter is because tuition is fully covered, util- requires equal probability of admission. Private-school ity costs of applying are independent of income, and the slots are, however, limited. While the voucher covers all potential monetary cost may not be enough to deter appli- tuition costs, students face utility costs of applying for a cation. In contrast, in the enrollment stage, there will likely voucher that they may not get, and may face a monetary not be ability sorting but there will be sorting by income. cost of attendance if, for example, transportation costs The former is because ability sorting has already occurred, are not covered. Chakrabarti shows that there is sorting and the latter is because monetary-attendance costs that by ability at the application stage, but there may not be arise for some will deter take up by some lower-income sorting by income. The former is because higher-ability students. Epple, Romano, and Urquiola: School Vouchers 461

counterpart calibrated to data for New Jersey. Most households taking such vouchers would His model predicts that private schools will reside in or move to low-income districts, emerge in poor communities as high-income whether or not targeted to these districts. households take vouchers and relocate to More generally, for realistic values, vouchers occupy higher-quality housing in such com- targeted to the poor district will have small munities. Hence, stratifcation of income effects. Similarly, income-targeted vouchers and property values across communities is will have modest effects unless school qual- reduced. Poorer households do not experi- ity depends largely on child ability. In that ence improved peer quality in their (pub- case, low-income parents of high-ability chil- lic) schools, however, because incumbent dren will choose private schools in districts somewhat higher-income households opt for with poor-quality public schools. Milwaukee private schools or relocate to communities would appear to be fertile ground for empir- with better public schools. Expenditure per ical investigation of Nechyba’s predictions of student rises in public schools as long as the the effects of vouchers on household location, voucher is not high enough to induce more but such testing has not been undertaken. than half the population to attend private Ferreyra (2007) builds on Nechyba’s schools. Hence, public-school quality could model introducing both preferences for reli- increase if this increased spending offsets gious schools and idiosyncratic (randomly the decline in public-school peer quality. By drawn) preferences for school types (pub- allowing mobility and expenditure effects in lic, private, secular, religious) and location. public schools, Nechyba’s analysis predicts She estimates the parameters of the model more favorable effects of universal vouch- using data from seven metropolitan areas. ers on poor students, relative to Epple and She then uses these estimates to simulate Romano (1998, 2008). On the other hand, the effect of several voucher programs. In by not allowing price discrimination, bene- particular, Ferreyra examines the differential fts from vouchers to high-ability students, effects of vouchers depending on whether whether rich or poor, are curtailed. these can be used at religious schools.37 She Nechyba (2000, 2003) extends this frame- fnds that both types of voucher programs work by studying vouchers targeted to poor increase private-school enrollment and give individuals and poor districts, as compared rise to mobility effects of the type identifed to universal vouchers. This is of particular by Nechyba. She also fnds that a prohibition relevance for the US context.36 He concludes on the use of vouchers at religious schools that a small non-means-tested voucher tar- results in less private-school enrollment and geted to residents of low-income districts is can shrink religious enrollments as some stu- largely equivalent to a universal voucher that dents take a voucher and switch from reli- is not targeted, due to household mobility. gious to secular private schools. Milwaukee’s 1998 shift to allowing the use of vouchers at religious schools provides a potentially 36 As reported in tables 1 and 2, targeting vouchers to the poor usually characterizes US voucher programs. promising environment for testing these pre- Targeting to poor districts would be similar to the prac- dictions, although, to date such testing has tice of targeting to poorly performing schools if households not been undertaken. need only reside where their designated public school is so labeled to get a voucher, though prior attendance requirements limit this. In addition to differences in the underlying models, the ability targeting analyzed in Epple 37 We describe the vouchers in Ferreyra (2007) as and Romano (2008) has a normative focus, while targeting universal and nontargeted in table 4, but the variation in forms studied in Nechyba (2000, 2003) are better moti- whether vouchers can be used at religious schools or not is vated empirically. central to her paper. 462 Journal of Economic Literature, Vol. LV (June 2017)

Neilson (2013) develops and tests a model schools serving low-income students charge with geographically differentiated schools lower tuition and provide lower effort than that compete for vouchers that are higher for private schools serving high-income stu- poorer households. The empirical applica- dents. The rent-seeking public-school sec- tion is to Chile, as we discuss in section 5.3. tor will provide one of two quality levels, a Private schools are differentiated by their high level suffcient to attract both high- endogenously chosen quality, as well as by and low-income students, or a low level their location. There are no peer effects. that attracts only low-income students. Households differ demographically (e.g., If the former, high-income students pre- in income) and in residence, with idiosyn- fer public schools over paying tuition to cratic preferences over schools, as well as attend private school; hence the public sec- (estimated) systematic differences in prefer- tor attracts all students. McMillan consid- ences. Locational differences among private ers the effect of a universal voucher in the schools and idiosyncratic preferences imply high public-school effort case. The voucher market power.38 Proft-maximizing private lowers the cost of private-school education, schools choose quality below the competitive and may induce high-income households to ( zero-proft) level, with the quality reduction switch to private schools. If this happens, increasing in their market power. The quality public schools choose to lower effort to the markdown is greater in poorer areas, where level required to retain only low income stu- households are estimated to be more price dents. A voucher could, alternatively, induce sensitive. As such, vouchers that are higher public schools to increase effort to retain for poorer households have a greater posi- high-income students. Hence, McMillan tive effect on quality. This paper speaks to provides a mechanism such that, instead question 1, with gains to voucher students of improving public-school effectiveness, coming largely from reduction in market voucher-induced private-school competi- power among private providers; but it is tion, and associated income stratifcation, also relevant to question 3 on public-sector may have an adverse effect on public-school responses. effectiveness. McMillan’s framework thus In contrast to the research discussed so captures an endogenous peer effect associ- far, McMillan (2004) is squarely focused ated with variation in how parents of differ- on question 3. This paper endogenizes how ent income levels are able to induce school public schools adjust their effectiveness in effectiveness. response to competition from more effec- Building on McMillan (2005), Ferreyra tive private schools. In McMillan’s frame- and Liang (2012) model imperfect paren- work, households are of two income types, tal and policy maker monitoring of schools’ with high-income households willing to effort choices. Households vary in ability pay more than low-income households for and income, and higher-ability households school quality. Schools exert effort, which are more effcient at monitoring their chil- raises their effectiveness but comes at a cost dren’s learning. Competitive private schools to them. Competition constrains private are suffciently small that no free-rider prob- schools to provide effcient effort. Private lem arises in parental monitoring, while free riding prevails in the public sector. They demonstrate that combining vouchers with 38 Nielson’s schools are then differentiated “vertically” increased public monitoring of the public by quality and “horizontally” by location and idiosyncratic appeal. Epple et al. (2013) also provide a model of vertical sector has the potential to increase every- and horizontal school differentiation, applied to colleges. one’s achievement and aggregate welfare. Epple, Romano, and Urquiola: School Vouchers 463

Chakrabarti (2013c) also develops a model her innate ability, her effort, and her school’s where vouchers could increase or decrease value added. In the second period, the indi- effort of rent-seeking public schools. In vidual is employed in a competitive labor her model, students differ continuously in market. MacLeod and Urquiola assume income and ability, with demand for qual- that innate ability and effort are not directly ity increasing in both and school quality observed; employers infer ability from all the depending on school effort and mean ability. available information. A key assumption is Private schools cannot price discriminate as that individual innate ability is more accu- in Nechyba’s (1999) model. Universal vouch- rately assessed by schools than by employers. ers induce higher-ability students to exit the For example, schools might be better able public sector, implying students at the margin to administer admissions exams or conduct of attending public school are of lower ability parental interviews. As a result, employers in the voucher regime. Increasing effort and rationally use an individual’s school of ori- public-school quality has a smaller marginal gin as a signal of her skill. In turn, students effect on increasing their attendance. If this seek to attend schools with good reputations, is the dominant effect, then public schools where a school’s reputation is the expected worsen as in McMillan (2004). skill of its graduates. Motivated by voucher programs like the Two key sets of empirical implications former Florida program (FOSP), targeted emerge. First, “laissez-faire” school sys- to failing schools, Chakrabarti then contrasts tems have a tendency towards stratifcation such a voucher with a policy that awards by ability. Students in nonselective schools vouchers only if the public school fails to (e.g., the public sector) will be hurt by this meet a quality standard. She shows that stratifcation; their low ability is revealed to with appropriate setting of the quality stan- employers by their failure to gain admission dard, such a program will induce increased to a selective school. Second, the effects of public-school effort and quality improve- school competition induced by vouchers will ment. This is because public schools have depend on design. For example, schemes a stronger incentive to improve to meet the that restrict schools’ ability to select students standard and avert the voucher and loss of will maximize effort on the part of students students, while students at the margin of and their willingness to choose schools with attending private schools would always exit the highest value added. Schools, in turn, with a universal voucher. She goes on to test will be forced to build their reputations on the model as discussed in section 5.3. their advantage in value added, as opposed In exploring why sorting might adversely to just their ability to select high-ability stu- affect students left in the public sector, dents. In contrast, systems that facilitate the above models focus on peer effects.39 selection will tend to lower students’ study MacLeod and Urquiola (2009, 2012) depart effort and raise the probability that they from this by studying informational mecha- choose schools based on peer quality rather nisms instead. Specifcally, they model the than value added. combination of educational and labor mar- To summarize, MacLeod and Urquiola kets. In a frst period, each individual attends (2009) show that even in the absence of peer school and accumulates skill as a function of effects, the reputational mechanisms empha- sized by Friedman (1962) do not ensure that vouchers will increase the production of 39 See Sacerdote (2011) and Epple and Romano (2011) for recent surveys of the literature on educational peer skill. The intuition behind this result is two- effects. fold. First, the fact that school membership 464 Journal of Economic Literature, Vol. LV (June 2017) allows students to convey their innate ability voucher). Invoking the public-sector bud- reduces the incentive they face to work hard get constraint eliminates one of these vari- and do well in school. Second, under some ables, leaving a two-dimensional choice conditions, rational parents will not always set and the accompanying challenges for prefer the highest value-added schools, analyzing majority rule set forth by Plott and rational schools will not always choose (1967). Second, even if one variable, say the to compete on value added. These implica- voucher, is exogenous, preferences over the tions are consistent, for example, with the tax rate are not single peaked. Epple and well-identifed empirical evidence that selec- Romano (1996) investigate the second of tive schools only sometimes produce higher these issues, considering voting over the tax learning (e.g., Clark 2010; Abdulkadiroglu, rate that funds public educational expen- Angrist, and Pathak 2014; Pop-Eleches and diture and the voucher, taking the voucher Urquiola 2013). amount as given.40 They show that, despite the non-single-peaked preferences, equilib- 4.2 Vouchers and Political Economy rium under majority rule is likely to exist for The research reviewed thus far studies realistic parameter values. The equilibrium implications of vouchers but does not analyze is of an ends-against-the-middle form, with the endogenous public choice of voucher a coalition of poor and wealthy households, policy, a subject of obvious importance given comprising half the population, favoring a the poor performance of voucher proposals reduction in the tax rate and middle-income in referenda in California and Michigan. households, comprising the other half, pre- Ireland (1990) provided the foundation for ferring an increase.41 research on this issue. In his framework, Work to endogenize voucher choice has households obtain utility from the education followed two avenues. One is to consider vot- of their children and from the consump- ing one issue at a time. The other is to limit tion of other goods. Households’ demand the choice set in other ways, such as requiring for educational expenditure is increasing in that the voucher equal public expenditure income. Expenditures on public schools and or by considering voucher-only economies. on a voucher, if any, are funded by a propor- Hoyt and Lee (1998) endogenize both the tional income tax. Ireland investigates how voucher and tax rate by considering sequen- public-school spending is impacted by the tial voting with the voucher determined frst introduction of a universal voucher smaller and then the tax rate second. Employing than per-student public-school expendi- information on the income distribution in ture. The effect may be either an increase each state, they fnd that there are some states or decrease, depending on whether the in which introduction of a $1,000 voucher reduction in outlay for students who switch would permit lowering the tax rate without from public to private school in response to lowering public expenditure per student. the voucher is suffcient to offset the cost of providing a voucher to students who would attend private school anyway. 40 See also Glomm and Ravikumar (1998). Ireland treats the voucher and tax rate 41 In a very similar model, assuming existence of majority- choice equilibrium, Rangazas (1995) identifed the trade- as exogenous; subsequent work has sought offs in the public choice of expenditure in the public school to model these as chosen by majority rule. for a given voucher. His computational analysis predicts This effort encounters two challenges. First, that a voucher equal to 1.25 percent of a teacher’s annual salary would cause per-student public expenditure to the policy vector has three variables (tax increase. Investigation of “ ends-against” voting is under- rate, public-school expenditure per pupil, taken by Brunner and Ross (2010). Epple, Romano, and Urquiola: School Vouchers 465

Chen and West (2000) take the voucher Romano (2014). They analyze simultaneous as equal to public-school expenditure per voting over the tax rate, public-school expen- student in their examination of the political diture per student, and the voucher, exploit- economy of income targeting. If vouchers ing the citizen-candidate model of Besley produce some effciency gains, they fnd that and Coate (1997). They provide necessary the targeted regime is likely to be majority and suffcient conditions for equilibrium, preferred both to the no-voucher status quo and show computationally that equilibrium and to a nontargeted voucher regime. exists for realistic parameter values. They Another approach, voucher-only econ- also show that a voucher is likely to gar- omies, is employed by Fernandez and ner greater political support when income Rogerson (2003) to study vouchers in a inequality is low. Intuitively, when inequality dynamic setting in which education spend- is low, a relatively small number of house- ing impacts adult earnings. They consider holds choose private school. A marginal three alternative voucher programs: a uni- increase in the voucher induces a relatively versal fat-rate voucher, a means-tested large exodus from the public schools, permit- voucher, and a “ means-equalizing” voucher ting an increase in public-school expenditure that depends on household income and the per student with a lower tax rate, a change amount of income devoted to education. that garners unanimous support. They fnd that all three alternatives increase Epple, Romano, and Sarpca (2014) utilitarian welfare substantially, relative to extend this model to include income target- the purely private system, and all tend to cor- ing via simultaneous voting over the tax rate, rect the ineffciency from low investment on expenditure per student in public schools, the part of poor households.42 the voucher amount, and the maximum Bearse et al. (2013) continue the study income of households eligible for vouchers. of income-targeted programs by consider- They fnd that income targeting increases ing a voucher that is positive for the lowest- political support for vouchers by limiting income household and declines linearly with their use by high-income households that income to zero. A sequential voting equilib- would use private school even in absence rium, with the tax rate chosen frst, followed of vouchers, and that a targeted voucher by the parameters of the voucher program, always garners political support. The pref- is shown to exist. Their computational model erence for targeted vouchers conforms to shows that, compared to the no-voucher pub- observation, but the fnding that a targeted lic equilibrium, the means-tested voucher voucher would always garner political sup- chosen by majority rule benefts the poor via port does not. This latter fnding brings higher education spending and a lower tax to the fore limitations of the workhorse rate, while also beneftting wealthy house- Ireland (1990) framework, particularly the holds who prefer private schooling coupled assumptions that all households have the with a low tax rate. same preference function and differ only An alternative approach to overcome the in income. Evidence on voting by legisla- Plott existence issue is adopted by Epple and tors for voucher proposals discussed in sec- tion 5, along with differences in opinions 42 Fernandez and Rogerson (2003) note that their three evoked by vouchers, point to consideration voucher systems can be viewed as analogous to three dif- of ideological differences in preferences as ferent systems of state grants to local districts (foundation, an avenue for extending the Ireland frame- means tested, and power equalizing). Hence, their analysis can alternatively be viewed as informing the political econ- work. This is being pursued in ongoing omy of public-school fnance. research of Epple, Romano, and Sarpca. 466 Journal of Economic Literature, Vol. LV (June 2017)

To summarize the research on the polit- publicly and privately funded voucher pro- ical economy of vouchers, two prominent grams have been explicitly designed as exper- themes emerge. One is that the majority iments. In other instances, nonexperimental of voters, those who do not choose private programs are oversubscribed, and random school in the absence of vouchers, will ben- assignment arises from the use of lotteries to eft by targeting vouchers so as to prevent allocate scarce slots. These cases, at least in take-up by those who would attend private principle, establish a clear counterfactual— school anyway. The other is that a voucher on average the observed and unobserved offering less than per-student expenditure in characteristics of treated and untreated public school will generally be preferred by groups should be identical, and therefore those who would continue to attend public simple comparisons of their achievement school. Such a partial voucher induces some can reveal the causal effect of vouchers. households to switch to private school, and One aspect to bear in mind is that in all this yields a net tax savings to those attend- the programs we discuss, those who are ing public school equal to the differential offered a voucher are not required to use between per-student public spending and it. Hence, a distinction arises between the the voucher. effects calculated by focusing the compar- ison on those who have been offered the voucher and those who actually take it up. 5. The Empirical Evidence A comparison of the average outcomes of This section reviews the empirical evi- those offered and not offered the voucher dence on each of the fve questions raised yields an “Intent to Treat” (ITT) estimate. above. For each, we highlight the method- A “Treatment on the Treated” (TOT) esti- ological challenges that arise and we focus mate adjusts for the proportion of students the review on the papers that have most suc- who take up the voucher—thus providing cessfully dealt with these challenges. This an approximation to the effect of the treat- implies that we discuss some voucher pro- ment on those who received it. Both types grams more than others, depending on the of estimates have analytical advantages. For question at hand. instance, the ITT estimate might provide a reasonable approximation to the effect of 5.1 Question 1: What effects do vouchers implementing a small-scale voucher scheme, have on the students who use them?—The since it is always the case that the proportion key challenge in answering this question is of students who take up the voucher is less establishing credible counterfactuals; e.g., than one. what would the outcomes of voucher win- Finally, in some cases we also review ners have been had they not received a the results of papers that, facing a lack of a voucher? While different types of research (quasi-) experimental counterfactual, seek attempt to do this, the papers on small-scale to establish one by using matching tech- voucher programs are the most focused on it niques or otherwise attempting to control and have tackled it with the highest degree for observable characteristics. In such cases, of credibility. one must bear in mind that estimates can still This refects that, in many cases, their be biased if unobserved student or parental setup at least emulates a randomized con- characteristics are correlated with treatment. trolled trial in which subjects are randomly To preview the bottom line on question 1, assigned to treatment (voucher) or control the evidence does not suggest that awarding ( no-voucher) groups. Specifcally, some students a voucher is a systematically reliable Epple, Romano, and Urquiola: School Vouchers 467 way to improve their educational outcomes. emerges for reading after three years, but A perhaps surprisingly large proportion of none for math). Overall, there is little evi- the best-identifed studies suggest that win- dence that the Washington DC Opportunity ning a voucher has an effect on achieve- Scholarship Program resulted in a sustained ment that is statistically indistinguishable improvement on test scores. from zero. Moreover, three recent studies In contrast, Wolf et al. (2010a) report fnd large negative effects on test scores of that the program had a large and statisti- voucher recipients. This is contrary to what cally signifcant impact on graduation rates. one would expect, for example, if private After four years, students who were offered or independent schools had systematically a voucher (ITT) were 12 percentage points higher value added. There is, however, recent more likely to graduate than those who were evidence from two randomized-control stud- not, with a corresponding TOT effect of ies that point to more favorable effects on 21 percentage points. Exploring heterogene- attainment. There is also evidence that in ity in impacts, Wolf et al. fnd similar effects some settings, or for some subgroups or spe- among students originally in schools desig- cifc outcomes, vouchers can have substan- nated as “in need of improvement.” tial positive effects on those who use them. The School Choice Scholarship Foundation A question is, therefore, what accounts for created three voucher programs—New the variation in estimated impacts? The liter- York City, Dayton, and Washington, DC— ature offers some tentative and useful clues, that also conform to experimental design. but no defnitive guidance. This refects two The most intensively studied of these is aspects we will be explicit about. First, the the one in New York, where in 1997 a lot- best evidence on question 1 comes from very tery was conducted among approximately different settings—in this section we review 11,000 applicants (Peterson et al. 2003). studies on the United States, Colombia, and None of these experiments yield signifcant India—and while all these provide useful test score effects for non–African American evidence, extrapolating is diffcult, as these students. Nonetheless, Mayer et al. (2002) settings vary along multiple dimensions. fnd the program increased the test scores Second, the experimental studies can provide of African American students in New York clear counterfactuals and credibly answer by about 6 percentile points (ITT). Krueger question 1, but they deliver a “reduced- and Zhu (2004) show, however, that this fnd- form” answer that does not fully reveal what ing is sensitive to how ethnicity is coded, as mechanisms account for the effects—a fur- well as to how one handles students with ther reason for why extrapolation is diffcult. missing baseline scores.43 In Washington, Peterson et al. (2003) fnd signifcant effects 5.1.1 The United States for African American students at the end of Wolf et al. (2010a, 2010b) report on the two years of treatment, but these vanish by Washington DC Opportunity Scholarship the third. In Dayton, they fnd that African Program, which used an experimental design. Americans had a 4 percentile point advan- Their sample consists of roughly 2,300 stu- tage at the end of two years (signifcant at dents, of whom about 60 percent were the 10 percent level). Overall, this group of offered a voucher, with the rest serving as a experiments suggests some—albeit not very control group. Of those offered a voucher, robust—indication of test score effects for 77 percent made use of it. The authors fnd no signifcant impact on test scores after 43 On this issue see also Barnard et al. (2003), Krueger one, two, or four years (a signi fcant effect and Zhu (2003), and Peterson and Howell (2004a, 2004b). 468 Journal of Economic Literature, Vol. LV (June 2017)

African American students, and none for the sample of public-school students as the com- rest. parison group, obtaining similar fndings. As in the DC Opportunity Scholarship Witte et al. (2008, 2009, 2010, 2011, 2012) Program, however, these experiments pro- conduct a fve-year study of the effects on duced better results in terms of graduation voucher recipients (TOT) using a match- rates, at least for African American students. ing strategy. They fnd no signifcant effects Specifcally, Chingos and Peterson (2015) on test scores in the frst, second, and third study college enrollment as another outcome year of the program. A statistically signifcant in New York. At the time of the experiment fourth-year gain of 0.15 standard deviations (late 1990s), participants were in grades K–5. emerges in reading; gains in mathematics Chingos and Peterson were able to obtain are also evident, but are signifcant only for follow-up information on college enrollment students in grade seven. Overall, this analy- for a remarkable 99 percent of the roughly sis suggests that during this post-expansion 2,700 students in the original study. They phase, the Milwaukee voucher program had fnd no signifcant differences between the little, if any, effect on test scores. In con- treatment and control groups as a whole, but trast Cowen et al. (2011) and Cowen et al. a signifcant difference for African American (2013) use a matching strategy and fnd pos- students—for those offered a voucher (ITT), itive impacts on years of schooling, although the estimated increase in part- and full-time the results are not entirely robust to differ- enrollment is 7 percentage points, a 20 per- ent specifcations. Beyond potential biases cent increase. from unobserved characteristics, a concern The above papers focus on voucher pro- with these longer-term matching-based esti- grams that were designed with an explicit mates emerges from the possible existence experimental setup in mind. This was not the of contemporaneous non-voucher-related case in Milwaukee, which displays variation policies. For instance, starting in 2002 the in its ability to deliver clear counterfactuals public reporting of schools’ test scores began over time. Specifcally, in its early years the to be required, and this might have affected Milwaukee program featured randomization schools’ performance quite aside from due to oversubscription, but starting in 1994, vouchers. increases in the income cap and the incor- While the studies discussed above fnd poration of Catholic schools had the effect little systematic evidence of positive effects of making vouchers generally available to of vouchers on achievement, they do not most eligible students without recourse to fnd signifcant negative effects. By contrast, lotteries. Abdulkadiroglu, Pathak, and Walters (2015) Rouse (1998) analyzes impacts during (APW henceforth) fnd large negative test both periods.44 First she exploits random- score effects for the Louisiana Scholarship ization, fnding little evidence of effects for Program (LSP). APW study test scores in reading. Her estimates (both ITT and TOT) 2012–13, the frst year following statewide for mathematics are substantial—statistically adoption of the Louisiana voucher program, signifcant effects of 0.3 to 0.5 standard devi- a program that previously had been available ations over a four-year period. She also fol- only in New Orleans. lows Witte (1997) in considering a random APW exploit lottery selection of students to oversubscribed private schools for LSP voucher applicants in third through eighth 44 See also Witte, Sterr, and Thorn (1995) and Greene, grades, studying effects on scores in stan- Peterson, and Du (1996). dardized tests of math, science, social studies, Epple, Romano, and Urquiola: School Vouchers 469 and English. APW fnd that 1,412 students performing, but must also be accepted by who applied to oversubscribed schools were a participating private school. Mathematics selected by lottery, with subsequent test scores decline each year by around 0.5 − σ scores available for upwards of 85 percent and reading by around 0.3 , estimates that − σ of these students. Causal local average treat- are very robust to alternative specifcations. ment effects on math, science, and social Because participating private schools can studies are 0.413 , 0.263 , and 0.331 select students, propensity score matching − σ − σ − σ respectively, all signifcant at the 1 percent is employed for identifcation. Specifcally, level. A negative but insignifcant effect is voucher takers in barely eligible schools are found for English. matched on observables to ineligible stu- APW conduct extensive analyses to inves- dents in public schools that barely exceeded tigate robustness and possible differences in low performance. As the authors discuss, impacts of the voucher across student income this sharp identifcation limits the treated groups and geographic areas. Their fndings students to 445, implying that effects on of negative impacts of vouchers are robust, voucher takers in the worst public schools e.g., with estimation methods accounting for might differ. sample attrition, and are found for all income Why students in these studies elect to groups and geographic areas. Participating attend private school where they perform private schools are found to have falling relatively poorly on tests is an important and enrollments prior to their participation in open research question. Students may have LSP, suggesting that the voucher program is alternative goals, e.g., religious study, or may attracting schools that are struggling. It will be making mistakes. It is notable that expen- be important to investigate whether these diture per student in the attended private negative effects persist for subsequent years schools is generally lower than in their public of the LSP, but as APW conclude, “These alternatives. results suggest caution in the design of Overall, the evidence on the United States voucher systems aimed at expanding school fnds not very robust effects on test scores, choice for disadvantaged students.” most frequently nonexistent, some positive A frst indication regarding persistence effects on blacks, but also the just-discussed of negative effects of the LSP emerges large negative effects. More robust evidence from work by Mills and Wolf (2016). These has accumulated regarding positive impacts authors use a slightly larger sample of LSP on graduation probabilities, particularly for students, and are able to expand the analysis black students. to a second year. Mills and Wolf state that 5.1.2 Colombia their frst-year results largely match those in APW. For the second year, they still fnd Colombia yields perhaps the most positive negative effects, although somewhat smaller evidence that emerges from (quasi-)exper- in magnitude. imental work on question 1. Specifcally, Figlio and Karbownik (2016) also fnd Angrist et al. (2002) exploit voucher lot- large negative and signifcant effects on teries implemented in the cities of Bogotá both math and reading scores of voucher and Cali. In terms of test scores, their key recipients in the statewide Ohio “EdChoice fnding is that three years after the alloca- Scholarship Program,” notably persisting tion, voucher winners scored 0.2 standard for students through the three years of the deviations higher on achievement tests. study. Voucher-eligible students have their Using a similar design, Angrist, Bettinger, designated public school deemed to be low and Kremer (2006) fnd that, correcting for 470 Journal of Economic Literature, Vol. LV (June 2017) differences in test taking between lottery schools? This is a possibility, since winners winners and losers, the program increased on average used the voucher to “upgrade” high-stakes college admissions test scores to more expensive institutions—Angrist also by 0.2 standard deviations. They fur- et al. (2002) report that vouchers “crowded ther fnd an effect on longer-term outcomes: in” educational expenditure to some extent. voucher winners were 15–20 percent more There is less data on the resource changes likely to complete secondary school, less that vouchers imply in the United States. likely to work while in school, and less likely A fnal possible channel relates to student to marry or cohabit as teenagers. incentives. In Colombia the vouchers were In short, the experimental results from renewable contingent on grade completion, Colombia are more positive than those from and thus the program included an incentive the United States in every measured dimen- component—voucher winners faced a stron- sion. A relevant question is: why are voucher ger reward for doing well at school. Thus, winners in Bogotá and Cali benefting more superior performance could have been due consistently than those in New York City or to incentives, rather than to the voucher pro- Washington DC? None of the experimental vision itself.45 studies reveal the precise channels through To summarize, the Colombian experiment which its effects work—the clear identifca- suggests that vouchers had a positive effect tion comes at this cost, to some extent—so it on tests scores and several other outcomes, is not possible to answer this question defn- but the diffculty in attributing effects to a itively. Nevertheless, the institutional differ- precise channel makes it diffcult to draw ences between the US and Colombia voucher precise policy implications. experiments render some differences more 5.1.3 India or less likely as potential candidates. Is it possible that public schools in Turning to India, Muralidharan and Colombia are much weaker than in the Sundararaman (2015) analyze an experiment United States, and so the opportunity to use in villages of the state of Andhra Pradesh, as a private school has a large effect? This may described in section 3.1.3. They fnd that four play a role but is unlikely to provide a full years after treatment, lottery winners did not explanation, as—somewhat unusually—both have higher test scores than losers in Telugu voucher winners and losers in Colombia (the local language), Math, English, Science, tended to enroll in private schools. For and Social Studies; in contrast, there was a example, Angrist et al. (2002) point out that positive and signifcant effect in Hindi. The while about 94 percent of lottery winners authors interpret this as an overall positive attended private school in the frst year, so effect, since private schools achieve higher did 88 percent of the losers. This partially Hindi results with no disadvantage in the refects (section 3.1.2) that a requirement for other tests. application was to have been accepted at a private school (the stated goals of the pro- gram were related to raising enrollment rates 45 Digging even deeper into mechanisms, the gains in by increasing private participation). Thus, Colombia could have also refected peer effects. However, Bettinger, Kremer, and Saavedra (2010) suggest that one might reasonably expect the program to at least for a subgroup of PACES benefciaries, at least be more attractive to students strongly inter- observable peer quality does not seem to account for the ested in private school anyway. results. Specifcally, they show that the advantage found in Angrist et al. (2002) persists, even when one considers stu- Is it possible that the positive fndings dents who chose to attend vocational schools with typically refect greater resources at the receiving lower observable peer quality. Epple, Romano, and Urquiola: School Vouchers 471

Interpreting the effect in Hindi is com- Hanna, and Ryan (2012) and Muralidharan plicated by the fact that public schools in and Sundararaman (2011). Andhra Pradesh essentially do not teach Muralidharan and Sundararaman (2015) Hindi at all. More specifcally, Muralidharan emphasize that, coupled with the above and Sundararaman use interesting comple- fndings on achievement, the fact that the mentary data to show that the private schools private schools spend so much less implies spend much more time teaching Hindi a substantial private productivity advantage. (essentially relative to a base of zero in public They also show that the crux of this cost dif- schools) and substantially less on the remain- ference is in teacher salaries—private-school ing subjects, except for English.46 teachers are younger, typically less trained, The setting this paper explores also more often female, and on average make raises interesting contrasts with the US and only one-sixth the salary of their public- Colombia cases described above. Importantly, sector counterparts. In short, private-school in contrast to Colombia, where voucher win- students have instructors who are paid much ners benefted from greater expenditure, less. On the other hand, in some dimensions Muralidharan and Sundararaman (2015) private-school students have access to more point out that private schools in the villages educational resources. For instance, they analyzed have expenditures that are only enjoy lower class sizes, and the probability about one-third of those in public schools. that they are in multi-grade classrooms is This refects that many private schools in lower by about 50 percentage points.47 India operate without subsidies, even as they In short, private and public schools in cater to very low-income individuals. This is Andhra Pradesh are organized very differ- observed in other settings, including Pakistan ently, but on net have no testing performance and parts of Africa (e.g., Andrabi, Das, and differences except in Hindi, which the pub- Khwaja 2013); in these areas, private expan- lic schools do not teach. It is again the case sion has been observed on a magnitude that that the myriad of differences in setting pro- in middle- or high-income countries would vide interesting implications, but complicate seem to require signifcant public subsidies. extrapolation. Just to cite one example, the This might refect parental willingness to voucher schools in Andhra Pradesh, India, escape a deeply dysfunctional public sector on average have lower class sizes than public in which there is evidence of rampant absen- schools; the opposite is the case in present- teeism by teachers; see, for example, Dufo, day Chile. To summarize, question 1 is perhaps the most straightforward among those we ask, and yet the above review makes clear that 46 The authors further note that not all private schools use Telugu or Hindu as the language of instruction, with the answer to it is complex. The results are some using English instead. While acknowledging that this not clear-cut—in many cases and for many is an endogenous choice (and hence not a feature of the outcomes transferring students to private experimental design), they present suggestive evidence that the choice of English as a medium of instruction dis- school does little to their achievement; in rupts learning. If parents do not realize this is the case, others, it improves or lowers it substantially. then further regulation of private schools may be war- In addition, the most rigorous research on ranted. But another possibility is that parents are aware of this but willing to make the sacrifce if, for example, this question typically delivers reduced-form English has high labor-market returns. A broader point the fndings around Hindi and English illustrate is that choice is likely to produce more of what parents want that may 47 The research in Dufo, Dupas, and Kremer (2011) or may not be skills along the precise dimensions policy suggests this might have a large favorable impact on makers prefer. performance. 472 Journal of Economic Literature, Vol. LV (June 2017) results. These do not reveal the mechanisms and of course randomizing at the country that account for the differences, making it level is not feasible. hard to draw clear implications. It is relevant 5.2.1 Large-Scale Voucher Programs: to point out that the evidence—particularly Chile and Sweden that from the United States—is consistent with vouchers improving some types of skills The original design of Chile’s voucher more than others. For example, it is possible scheme allowed private schools ease in set- that the positive effects on graduation rates ting up admissions policies. These could in the United States stem from improve- include features such as admissions exams ments in noncognitive skills, while the lack and parental and student interviews.49 In of a consistent impact on test scores points addition, since the mid-1990s, schools have to weaker impacts in a cognitive dimension.48 been able to charge tuition add-ons. Under such circumstances, models like Epple and 5.2 Question 2: Do vouchers induce Romano (1998) and MacLeod and Urquiola nonrandom migration from public to private (2009, 2015) suggest that the introduction schools, possibly lowering the achievement of of vouchers would lead to cream skimming students that remain in the public sector?— from the public sector, and stratifcation by Another fundamental question on vouchers income and or ability within the private / is whether these lead to sorting. As discussed sector. above, this is the common prediction of Hsieh and Urquiola (2003, 2006) analyze theoretical work. However, that work also this by looking at the growth of the private makes clear that the type of sorting observed sector across municipalities. They essen- will be a function of the rules governing the tially implement a difference-in-differences voucher system. analysis that asks if stratifcation measures We begin by considering the evidence increased more in markets with greater on large-scale voucher programs. These are growth in the private-voucher sector. Again, analytically suited to addressing question 2 this is not equivalent to a randomized exper- in that they provide a chance to study situa- iment and biases could arise, for instance, tions in which large numbers of students of from preexisting trends. Nevertheless, all types are given a chance to exercise school Hsieh and Urquiola fnd evidence that the choice, and in which schools get a chance to voucher-induced growth in the private sec- enter and exit the market in response. tor was associated with a “middle class” Yet the evidence from large-scale pro- exodus from public schools consistent with grams has disadvantages too. Most impor- cream skimming; this is robust to the use of tantly, almost by defnition, very clear candidate instrumental variables for private identifcation is diffcult to obtain from these growth. programs. They involve the distribution of McEwan, Urquiola, and Vegas (2008) vouchers to anyone who wishes to use them, additionally present a descriptive analysis and are typically implemented countrywide. of sorting in small markets. The idea—one Thus, it is very diffcult to establish clear related to an approach used in industrial counterfactuals regarding what would have happened in the absence of these programs, 49 Over the years, more restrictions on selection by private schools have been written into law. In our under- standing, these include generalized statements regarding prohibitions on selection rather than specifc, legally bind- 48 We thank an anonymous referee for this observation. ing mechanisms (e.g., centralized lotteries). Epple, Romano, and Urquiola: School Vouchers 473

organization—is that fxed costs determine independent schools must partially apply a that private voucher schools must be of at frst-come-frst-served criterion if oversub- least a minimum size in order to break even. scribed, and tuition add-ons are not allowed. This implies that very small markets—say Nevertheless, research points to some sort- very small towns—will tend be served by ing effects. For instance, Sandstrom and public schools only. Larger towns will have Bergstrom (2005) report that indepen- private participation. McEwan, Urquiola, dent-school students are more likely to be and Vegas (2008) focus on the range of immigrants and to have parents with higher towns (by population size) where private income and education (see also Bjorklund entry is frst observed, comparing the degree et al. 2006). Further, Bohlmark and Lindahl of sorting observed just below the approxi- (2007) fnd that public schools tend to lose mate size threshold that determines private students who are second-generation immi- entry to that observed just above. This is akin grants or whose parents are more highly to a “fuzzy” regression discontinuity design, educated, but fnd no evidence of sorting by albeit one with limited statistical power. income. They fnd that private entry is indeed related In more recent work that considers effects to stratifcation, consistent with the frst pri- through 2009, Bohlmark, Holmlund, and vate-school cream skimming the highest Lindahl (2015) fnd that after accounting ability/income kids from the public sector. for residential sorting, school segregation Finally, a large number of studies point to increased more in municipalities in which cross-sectional evidence of high stratifcation school choice became more prevalent (as in Chile. For instance, Valenzuela, Bellei, measured by the number of independent and de los Rios (2010) suggest that Chile dis- schools in operation). Specifcally, segrega- plays one of the highest levels of school-level tion in such areas has grown between immi- stratifcation by socioeconomic status in the grants and natives, and between children of OECD. In addition, Mizala, Romaguera, parents with high/low levels of education. and Urquiola (2007) suggest stratifcation is Nevertheless, they conclude that the magni- particularly extensive in the private sector.50 tude of the effect of choice on segregation In closing the discussion on Chile, it is is relatively low, and that Sweden still ranks worth mentioning that there is widespread as a country with relatively low levels of consensus among observers and policy mak- across-school sorting along such dimensions. ers there around the claim that vouchers 5.2.2 Small-Scale Voucher Programs have facilitated sorting. In addition and as we discuss below, the high degree of stratifca- The literature on small-scale programs has tion in the school sector seems to be a signif- also explored question 2. These programs icant contributing factor to student protests can be expected to have a different impact that have persisted over a number of years. on sorting (relative to large-scale programs) Stratifcation has been less of a focus on the due to the fact that they tend to display research in Sweden. Speculating, this might four features: (1) targeting of low-income refect that Sweden’s voucher design likely students, (2) lotteries in cases of oversub- promotes sorting less than Chile’s. As stated, scription, (3) requirements that voucher pro- ceeds be used for educational expenses (i.e., not to provide fnancial aid), and (4) rules 50 For other examples of large-scale school market lib- against tuition “ top-ups.” In addition, in eralization leading to stratifcation, see Lucas and Mbiti (2012) for the case of Kenya. For related evidence in the the case of the United States the potential United States, see Urquiola (2005). for voucher-induced sorting is set against a 474 Journal of Economic Literature, Vol. LV (June 2017) backdrop of a public-school system in which public-school students in school year 2006. parents can sort into school districts or catch- They fnd that voucher students are signif- ment areas (Tiebout 1956). Nevertheless, cantly more likely to be black or Hispanic, some scope for cream skimming remains English language learners, and female. They since the more affuent and/or more able also use a matched panel to consider paren- among the eligible population may be more tal characteristics. They fnd that voucher likely to apply for or use a voucher. parents report signifcantly lower incomes. Turning to the evidence, we begin with Their overall education levels are also lower, the largest voucher system in the United but there is a somewhat higher college par- States: Milwaukee’s. Chakrabarti (2013b) ticipation rate among them. Perhaps the investigates sorting during its frst fve years, most salient difference in the matched panel 1990–94. She fnds signifcant evidence that is that a much higher proportion of voucher the probability of applying to the program recipients report being Catholic (29 percent rises with individual ability, but not with versus 19 percent) and attending religious income. Among winners, there is some evi- service at least once a week (62 percent ver- dence that the probability of take-up rises sus 48 percent). with income but not with ability. Given the Wolf et al. (2009) investigate the take-up income targeting of the Milwaukee program of vouchers in Washington, DC. Of about during this period, any income stratifcation 1,400 students offered a voucher, 41 per- with respect to voucher use is limited to vari- cent used it for the full (three-year) period, ation within the population of low-income 34 percent made partial use of it, and 25 per- students. Hence, the fnding of stratifcation cent never used it. Comparing ever-users to by ability is more salient from the perspec- never-users, the most prominent difference tive of concerns about cream skimming. was that ever-users were only one-third as As it has grown, Milwaukee’s program has likely to have a learning or physical disabil- changed in ways that increase the poten- ity.52 There were no signifcant differences tial for sorting. First, the income eligibility in baseline test scores, family income, or limit was raised to 300 percent of the pov- mothers’ education. Ever-users were some- erty level. Second, a tuition premium for what more likely to be African American, high-school students with household income less likely to be Hispanic, and somewhat less more than 220 percent above the poverty likely to be male. limit was allowed.51 Fleming et al. (2013) There is less evidence on the effects analyze sorting in Milwaukee during this of tax-credit-funded vouchers on sorting. more recent period. They compare voucher An exception is work by Figlio, Hart, and students to a random sample of Milwaukee Metzger (2010), who study the FTC program. They fnd that, compared to nonparticipants, voucher participants attended lower-per- 51 That these two changes would go together is in some forming public schools. Moreover, voucher sense not surprising—raising the income eligibility limit results in a concurrent increase in political support for students were among the lower-performing permitting private schools to charge a tuition premium to students in the public schools they had voucher students. When only low-income households are attended. Hart (2014) presents results eligible for vouchers, few could afford a tuition premium, making the issue moot. As higher-income households become eligible, more are willing to pay a premium for more costly private schools. The conditions giving rise to 52 Similarly Wolf, Witte, and Fleming (2012) estimate political support for permitting tuition premia are thus the that between 7.5 to 14.6 percent of Milwaukee voucher same as the conditions likely to give rise to cream skim- students have disabilities, as compared with 19 percent for ming, if such premia are permitted. Milwaukee public schools. Epple, Romano, and Urquiola: School Vouchers 475

consistent with this, suggesting that voucher ability income children leaving to pri- / participants tend to come from schools vate schools, and with worse academic performance and higher rates of violence. In addition, they (3) A peer effect—for instance, if there is are more likely to exit public schools when nonrandom sorting the performance they encounter more convenient (e.g., by of those “left behind” may be affected distance) and varied private-school options. by no longer interacting with departing Finally, they are more likely to exit schools students. with high concentrations of African American students, and the latter holds regardless of While (1) is the object of interest in this case, the student’s own race. the presence of (2) and (3) make it very dif- To summarize, the evidence suggests fcult to isolate this effect. Specifcally, in that, perhaps not surprisingly, vouchers can order to isolate (1) it would be necessary to result in the nonrandom reallocation of stu- control for children’s characteristics, some of dents across and within sectors. That said, which may be unobserved. Further, even if the details of program design clearly matter. one observed all student characteristics, ade- For one example from among large-scale quately controlling for peer effects is diffcult, programs, Chile’s design generally facilitates given that the literature has not produced a sorting more than Sweden’s. consensus on the functional form of such effects, or even on whether a stable functional 5.3 Question 3: Do voucher programs form exists (Carrell, Sacerdote, and West pressure public schools to become more eff- 2013). A clear prior on the direction of at least cient?—A key reason to introduce competi- some of the effects in (1)–(3) could provide tion into any industry is the possibility that analytical leverage to empirically get a sense it will lead to productivity improvements. of the direction of the others. However, as Question 3 asks whether vouchers induce noted in section 4, theory does not provide these in the public sector, perhaps as its unambiguous guidance on any of these. schools attempt to fend off gains on the part Hsieh and Urquiola (2003, 2006) present of private competitors. evidence of these diffculties for the case of To illustrate the methodological chal- Chile. For example, they show that public lenges that this question raises, Hsieh and performance worsened in municipalities that Urquiola (2003) point out that a frst-pass experienced greater private growth after the answer to it is provided by calculating the introduction of vouchers. They point out that difference in average public-school perfor- this could be driven purely by composition mance before and after the introduction of effects—(2) in the listing above. They there- vouchers. They point out however, that one fore call for a focus on how the introduction would ideally want to decompose this change of vouchers affects aggregate performance. into three effects: This does not solve the challenge posed by (3), but it does control for (2) and poten- (1) The public sector’s change in value tially comes closer to identifying the effect added—essentially the object of inter- of vouchers on overall school productivity. est in question 3 We will return to that issue in the context of discussing question 4 (which focuses on (2) A composition effect—for example, aggregate, net effects); for now we review vouchers may worsen public-sector the evidence on question 3, keeping in mind performance if they result in higher the above challenges. 476 Journal of Economic Literature, Vol. LV (June 2017)

5.3.1 The United States the poverty line. Their logic is that the com- petitive impact of voucher availability on Hoxby (2003a) studies question 3 in the public schools will be greatest when public context of Milwaukee. She measures the schools have nearby private competitors. intensity with which public schools face They create four measures of private-school competition by the proportion of their stu- proximity, and fnd that public-school dents that are eligible for vouchers. In achievement is related to each of these mea- Milwaukee, this measure varies because sures signifcantly, albeit modestly: a one eligibility for a voucher is dependent on stu- standard-deviation increase in the number dents’ income. In this approach, schools with of nearby private schools raises achievement a low proportion of poor students serve as by 0.02 to 0.03 standard deviations. the control group. As an additional control, A special feature of the (now canceled) Hoxby chooses a set of low-income public FOSP facilitates identifcation of program schools outside of Milwaukee. She fnds that effects, but potentially confounds their inter- more intensively treated public schools have pretation for purposes of analyses related higher rates of productivity growth measured to vouchers. Specifcally, in this program as achievement on a standardized exam, rela- Florida schools were graded based on stu- tive to expenditure. dent performance on a series of standardized Chakrabarti (2008) extends Hoxby’s exams. If a school received an F grade twice approach, considering two periods in the within four years, its students became eligi- Milwaukee voucher system. She designates ble for a voucher. Schools that received one 1990–97 as Phase I; Phase II consists of years F faced a threat of a voucher, and the perfor- after 1998, roughly when the program expe- mance of students in these schools can then, rienced changes including the expansion of for example, be compared to that of their the proportion of eligible students and reli- peers in schools that received a D grade. gious school eligibility. She uses school-level Figlio and Rouse (2006) examine test- data, with the proportion of students on free score gains in schools receiving one F grade or reduced lunch (FRL) as a measure of the using several strategies including regression intensity of treatment. As controls, she uses discontinuity, with D schools serving as a con- the thirty-three Wisconsin public schools trol group. They fnd effects on high-stakes outside Milwaukee that had at least 25 per- mathematics tests (i.e., tests relevant to grad- cent of their population eligible for FRL, ing of the schools) of about 0.2 , larger than σ had a black population of at least 15 percent, effects on low-stakes exams, suggesting non- and were in locales similar to Milwaukee in trivial gains but also some strategic focusing 1990. Chakrabarti fnds little evidence that of resources. However, they emphasize and the voucher program had effects on public present some evidence suggesting that the schools in Phase I. By contrast, for Phase II, gains may be due to the stigma associated she fnds signifcant gains on the order of with receiving another F grade, rather than 0. 1–0.15 standard deviations; these are sta- to the threat of loss of funding associated tistically signifcant in reading and language with a voucher. In short, the program may arts, but mostly not in mathematics and confound the effects of vouchers with those science. of accountability. Figlio and Hart (2014) study the effect Chakrabarti (2013a, 2013d) continues of the FTC on public-school performance. the study of the FOSP program. Using This program is available for students from difference-in-differences and regression families with incomes below 185 percent of discontinuity designs, Chakrabarti (2013a) Epple, Romano, and Urquiola: School Vouchers 477 provides evidence that schools receiving voucher eligibility threshold, they fnd large, one F focused resources on improving the signifcant three-year achievement impacts scores of students predicted to be near the of voucher eligibility ranging between 0.05 σ boundary of the threshold of failure, and to 0.1 , and four-year impacts of similar σ on preparing for the writing exam, where magnitude. These estimates are robust to performance is believed to be more eas- including demographic controls and allow- ily improved. She provides some evidence ing different slopes on the two sides of the that the voucher threat was important, for eligibility threshold. Analysis of impacts by example, fnding larger effects of receiv- demographic groups suggests that these ing an F grade on schools that faced more estimated gains accrued primarily to white, private-school competition, as in Figlio and non-disadvantaged students. Insignifcant Hart (2014). Chakrabarti (2013a) focuses on effects are found with polynomial functions. pure gaming effects of the program by inves- Hence, while the results with linear func- tigating whether schools classify students tions point to positive competitive impacts, with an eye to preventing their scores from lack of robustness to more fexible functional counting toward the school grade. This anal- forms argues for caution. ysis again compares F to D schools, and fnds 5.3.2 Canada signifcantly increased classifcation of stu- dents as having limited English profciency. Chan and McMillan (2009) study the While F schools might have tried to do the effect on public-school performance from same by classifying more students as special a private-school tax credit in Ontario. This education, their test scores also excluded was passed into law on short notice in June from the school’s grade, the gains from this 2001, with the credit becoming available strategic reclassifcation would come at the in January 2002. The plan provided for a cost of these students then becoming eligi- private-school tax credit that was scheduled ble for another Florida voucher program. to grow in increments over fve years, but the These schools did not increase such clas- program was canceled in December 2003, sifcation. It bears repeating that studies retroactively to January 2003. Using the of the FOSP program provide interesting 2002–03 private-school enrollment share in a avenues for identifcation of the program public-school attendance zone as their mea- effects, but the challenge of disentangling sure of private-school competition, Chan and the accountability and voucher effects weak- McMillan fnd that a 1 standard-deviation ens implications that can be drawn for the increase in competition is associated with a more common accountability-independent statistically signifcant 0.1 standard-deviation voucher programs. increase in the percentage of public-school Figlio and Karbownik (2016, FK hence- students achieving the provincial perfor- forth) study the competitive impact of the mance standard for grade 3. Ohio voucher program, EdChoice, using a 5.3.3 Sweden regression discontinuity analysis. The idea is to compare performance of students Sandstrom and Bergstrom (2005) consider assigned to public schools barely eligible whether students in Swedish public schools for vouchers to ineligible students in pub- perform better if they live in municipali- lic schools that barely avoided their stu- ties that have a larger share of independent dents being voucher eligible. The estimated schools. As stated, such an evaluation con- impacts are sensitive to functional form. fronts diffculties that originate in the non- With linear functions on either side of the random sorting that follows private entry, as 478 Journal of Economic Literature, Vol. LV (June 2017) well as the endogeneity of this entry. The frst stated above, some studies focus not on of these might be somewhat mitigated, since questions 1–3, but rather on the net effect Swedish independent schools are not allowed of vouchers—question 4. The reason to do to select on ability. Nevertheless, applying to this can be stated by summarizing some of an independent school is still endogenous. the diffculties that arise in answering ques- Sandstrom and Bergstrom (2005) deal with tions 1–3, and why even ideal answers to this by way of a Heckman correction. In order these three questions may only give a partial to address the endogeneity of private entry, sense of the overall effect of vouchers. they use variables approximating whether Specifcally, as stated, question 1 can be local authorities are “hostile to independent credibly addressed with experiments, but schools.” Specifcally, they proxy for these atti- doing so provides only a partial assessment of tudes using measures of the extent to which the impact of vouchers. For instance, to the municipalities contract out responsibilities to extent that a private advantage is at least par- the private sector. The identifying assumption tially due to a peer effect, then this gain will is that this attitude will only affect educational not be independent of the size of the private outcomes through the channel that munici- sector and/or the sorting its growth induces. palities with less hostility will be less likely In other words, the advantage conferred by to block independent-school entry. The key transferring to a private school may dissipate fnding is that the presence of independent as the private sector grows and incorporates schools results in better public performance weaker children. In some scenarios—e.g., in a GPA-type measure, as well as in stan- if private schools are not more productive dardized mathematics exams and an indicator and peer effects are linear in means, pri- for whether students passed all three exams vate expansion may be zero sum (Hsieh and necessary for high-school admission. Urquiola 2003). To summarize, several studies of Further, even a solid answer to ques- public-school response to voucher-school tion 1 does not provide an assessment of competition have measured intensity of the consequences on the children not using competition either by the proportion of a vouchers. Studying questions 2 and 3 begins public school’s students who are potentially to provide a sense of this, but immediately eligible for vouchers, or by the proximity of raises signifcant empirical challenges. For private-school alternatives. Virtually all of instance, if vouchers induce sorting, then it these studies fnd that public-school achieve- is very hard to empirically isolate their effect ment increases with the intensity of treat- on public-school value added. ment. That said, most of these analyses do One alternative in the face of these dif- not have an iron-clad strategy to deal with fculties—particularly when looking at potential biases from composition effects large-scale programs—is to simply analyze (which section 5.2 suggests could be signif- market-level net effects (Hsieh and Urquiola icant) or with potentially confounding poli- 2003). This does not allow one to isolate the cies such as accountability.53 specifc channels through which vouchers work, but can provide a sense of their aggre- 5.4 Question 4: What is the net effect of gate effect. vouchers on educational outcomes?—As 5.4.1 Chile One of the more common approaches to 53 Figlio and Hart (2014) study the effects of Florida’s FTC program before implementation, and therefore avoid addressing question 4 has been to use panel sorting-related concerns. data for multiple local school markets. The Epple, Romano, and Urquiola: School Vouchers 479 changes in the private sector’s reach within scores increased substantially—by twenty- these are then compared to the change nine and forty-eight points respectively in average performance. This controls for from 2003 to 2011. Hanushek, Peterson, market-specifc fxed characteristics. In this and Woessmann (2012) estimate that Chile spirit, Hsieh and Urquiola (2006) apply had the second-highest growth rate among a difference-in-differences approach to forty-nine countries they studied for this municipal-level data for 1982 to 1996, sug- period. Looking at national tests, Neilson gesting that while municipalities with greater (2013) shows evidence of improvement private growth display clear signs of greater among voucher schools in fourth-grade test sorting, they display no relative advantage in scores during 2008–12—this contrasts with terms of the evolution of achievement on stan- stagnant performance between 2003 and dardized tests and years of schooling. As with 2007. At the same time, this progress seems the analyses of the effects of large-scale pro- to have signifcantly decelerated, depending grams on sorting (question 2), the key source on the subject tested, as measured by the last of concern with these estimates—despite the PISA tests in 2013. use of some candidate instrumental variables The literature features another approach (e.g., population density)—is that private to look at the net aggregate effects of choice: entry into school markets is endogenous. For structural estimation. Papers that take this instance, if outcomes had been declining in route often achieve interesting analytical areas where the private sector grew more, richness, but also require strong assump- these effects would underestimate the salu- tions. Beginning with test scores as an tary effects of competition. outcome, Neilson (2013) argues that the Other work implements a cross-sectional 2008–12 improvement cited in the previ- variant of this idea by looking for an ous paragraph is due to a 2008 reform that instrument for the prevalence of voucher increased the voucher for low-income stu- schools and evaluating its effect on aggregate dents. Specifcally, the reform increased performance. Here again, the challenge is the voucher by about 40 percent for the fnding credible instrumental variables for poorest 40 percent of the population, with private enrollment. Auguste and Valenzuela schools having higher concentrations of (2006) use distance to a nearby city and fnd low-income students receiving even higher evidence of cream skimming and signifcant payments. In exchange for this higher sub- positive effects on achievement. Gallego sidy, voucher schools were required to elim- (2006) uses the density of priests per dio- inate tuition top-ups for these students, and cese and fnds substantial effects on average to refrain from selective admissions. About achievement. three-fourths of voucher schools eventually Another way to consider aggregate chose to participate. effects—the one that takes this logic the fur- The paper uses rich data (that includes dis- thest—is to simply look at aggregate country tance to school) to estimate school-specifc performance, particularly in international quality measures and a random utility model tests. Hsieh and Urquiola (2003) point out of school choice by heterogeneous house- that Chile’s performance did not improve holds. The results suggest that the targeted in the frst twenty years after the voucher voucher: (1) increased average school qual- reform. Recent experience in this area has ity by 0.21 , (2) increased average vouch- σ been more favorable. After dropping by fve er-school quality by 0.16 , and (3) did not σ and seven points respectively from 1999 to affect quality at the non-voucher (elite) pri- 2003, Chile’s 8th grade math and science vate schools. These estimates are then used 480 Journal of Economic Literature, Vol. LV (June 2017) to parcel achievement gains between those family background characteristics. The iden- that result as low-income students switch to tifcation originates in that individuals vary higher-quality schools (as tuition drops to in the number of years they were exposed zero) and to increases in school quality. The to the voucher regime. The parameters of counterfactual with the targeted voucher the structural model are estimated using introduced but with no change in school about 100,000 person–year observations. qualities is simulated to estimate the former The results are then used to simulate choices effect. The analysis suggests that one-third and outcomes for those fully exposed to the of the achievement gain is from changes in voucher regime and to compare these to the school choice, and two-thirds is due to school counterfactual with the voucher program quality improvements. Further research shut down. here might consider further whether gains The results suggest that the introduction can be explained “simply” by increased of vouchers led to an increase in earnings school expenditure from the voucher. from years attending municipal and subsi- This approach addresses very interesting dized private primary schools, but a decrease issues, but also requires strong assumptions. from years attending secondary schools. For instance, period-specifc school quality The authors note that the secondary-school is measured by regressing test scores on a effects might be explained by entry of less- school fxed effect and a number of controls. effcient schools induced by the voucher, This assumes there is no selection on unob- and by reduced per-student expenditures servable characteristics; e.g., parental tastes noted in section 3. Educational attainment for educational achievement or religious is estimated to be substantially increased by instruction.54 In addition, the framework the voucher regime. For example, full expo- assumes that students can attend any school sure to the regime is estimated to increase they are willing to travel to and pay for. While high-school graduation by 3.6 percent, and consistent with the Chilean legislation, these completion of at least two years of college assumptions would seem at odds with the by 2.6 percent. Average lifetime earnings are extensive stratifcation and heated current estimated to be unchanged by the voucher. discussion over the implementation of more The increased attainment is offset by the binding mechanisms to stop selection, such lower return to secondary education and as centralized lotteries. delayed entry into the labor force.55 Earnings Finally, Bravo, Mukhopadhyay, and Todd variation is reduced by the voucher, as those (2010) present an evaluation of the attain- at the bottom end of the earnings distribu- ment and labor market—as opposed to test tion beneft from improved primary educa- score—effects of the Chilean voucher regime tion, while those at the top end suffer from based on estimation of a structural model of weakened secondary schools. The authors dynamic school and labor-market choices. fnd substantial increases in average dis- They use the 2002 and 2004 waves of a large counted lifetime utility, approximately survey of working-aged individuals that 10 percent. These gains arise from the utility includes educational and work history, and of time spent attending school and not work- ing. Gains are found at all percentiles, with

54 This is a highly restrictive way of measuring school quality value added, relative to other recent efforts in / the literature, e.g., Abdulkadiroglu, Angrist, and Pathak 55 Earning returns to college education are estimated to (2014), Kane and Staiger (2008), and Chetty, Friedman, be relatively low. The model does not allow the voucher and Rockoff (2014a, 2014b). regime to directly affect the returns to college education. Epple, Romano, and Urquiola: School Vouchers 481 larger increases at lower percentiles than Specifcally, measures (1)–(3) are found to higher percentiles. increase with the independent-school enroll- The paper is ambitious and the fndings of ment share. For instance, a 10 percentage- large attainment effects, no (average) earn- point increase in this share is associated with ings effects, and substantial lifetime utility a 0.08 increase in language and math scores σ gains add new fndings on the net effects of at the end of ninth grade, and a 0.04 rise in σ vouchers. Identifying the effects of vouchers the fraction of individuals completing at least at different school levels and on different one semester of university. As stated, these school types is also notable, relative to other estimates are obtained using data at the approaches. Again, however, the structural municipality level. When observations are approach comes at a cost. First, the identi- aggregated further the results, with respect fcation challenges inherent in a large-scale to test score and grade gains, are robust, program are still present. Second, to make while those with respect to college atten- the model tractable, individuals are of “just” dance and years of schooling are somewhat three types. Related to this, the model has less so. limited potential to provide insight into sort- Bohlmark and Lindahl (2012) conclude ing effects on schooling and labor-market by discussing the contrast of fndings for outcomes. For example, might the fnding Sweden relative to Hsieh and Urquiola’s of lower earnings from attending second- (2006) fndings for Chile. They observe ary school be a result of sorting (with both that the more favorable results for Sweden municipal and subsidized schools having with respect both to cream skimming and worse students on average in the voucher educational outcomes are consistent with regime), whether through composition or the predictions of the reputational model peer effects? of MacLeod and Urquiola (2009). Namely, the fact that it is harder for independent 5.4.2 Sweden schools to cream skim may imply that they may seek to build reputations for quality on Bohlmark and Lindahl (2008) present value added, rather than peer composition; an analysis analogous to that of Hsieh and parental school choice may in turn be driven Urquiola (2006)—they ask if outcomes by value added as well. improved by more in municipalities that expe- However, recent work suggests a poten- rienced more extensive independent-school tial source of caution with respect to the entry. They focus on three types of student test-score-related results from Sweden. outcomes: (1) GPA for the ninth and twelfth Specifcally, while as stated the content of grades, (2) participation in higher education the tests is nationally standardized, they are (a dummy for having completed at least one graded at each school. A concern that had year of education within six years of leav- been mentioned in Sweden is that indepen- ing compulsory schooling), and (3) years of dent schools might grade more leniently; schooling eight years after compulsory edu- indeed this is something that Bohlmark cation. On outcome (1), the results point to a and Lindahl (2008) themselves mention. small positive effect on average ninth-grade This was recently analyzed in a regrading GPA that does not persist until grade 12; on exercise described by Tyrefors, Hinnerich, (2) and (3) there is no evidence of an effect. and Vlachos (2013). Independent graders Bohlmark and Lindahl (2012) extend this reexamined exams from different schools. analysis to several additional cohorts, fnding The authors point out that independent signifcantly more positive conclusions. schools were more likely to have their grades 482 Journal of Economic Literature, Vol. LV (June 2017) lowered upon a second examination.56 It is parallel systems coexist. First, non-Catholics possible that the independent schools—per- are allowed to attend public schools—for this haps under greater pressure to please par- segment the public sector essentially oper- ents—engaged in more grade infation. ates a monopoly. Second, Catholics (who Consistent with this, Wondratschek, account for roughly 40 percent of the pop- Edmark, and Frolich (2013) look at other ulation) are allowed to attend a “separate” outcomes and fnd modest to zero effects. Catholic school system. If they do so these Two aspects distinguish their study. First, schools receive the resources that would have rather than look at variation in school choice otherwise gone to the public sector, emu- at the municipality level, they use a more lating a voucher system. In short, Catholics fnely grained measure calculated using geo- have greater choice and their presence can graphical information. Specifcally, they sup- generate competition between schools. pose that children who lived closer to more In particular, the competitive pressure will (public or private) schools were impacted be greater in a given area to the extent that: more by the voucher reform, which allowed (1) Catholics are prevalent in it, and (2) they them greater choice among nearby schools. are willing to switch between sectors. Card, Second, they consider both short- and Dooley, and Payne (2010) measure the long-term outcomes. They fnd small effects former simply by the population share of on test scores from exams graded at school Catholics; they proxy the latter by measur- (again, grade infation may be a concern, ing how willing the eligible population is to although Wondratschek, Edmark, and switch between systems when a school of a Frolich (2013) suggest it is not a major one) system that previously did not exist opens in and military exam scores for men. They fnd a given area. They fnd that this is more likely zero effects on longer-term outcomes such as to be the case in areas that are growing. A key university educational attainment, employ- assumption is that the fraction of Catholics ment, criminal activity, and health. has no direct effect on average test score Finally, as in Chile, one can undertake the gains. A further concern is that the entry of most aggregate analysis by simply looking the Catholic system into a given area may be at the evolution of Sweden’s performance endogenous. in international test scores (with analogous Card, Dooley, and Payne (2010) fnd sta- threats to identifcation). Here the picture is tistically signifcant average gains in achieve- distinctly more negative, as Sweden has seen ment (in terms of test-score improvement signifcantly deteriorating performance in between the third and sixth grades) that are the years since vouchers were implemented. greater in more competitive markets—those As in Chile, there have been calls for reform, that have more Catholics and are grow- although the details remain under debate. ing faster. They describe these as modest; for instance, markets with 60 as opposed 5.4.3 Canada to 20 percent of children with choice The aggregate effect of a voucher-like sys- would have achievement higher by 0.03 to tem is also explored by Card, Dooley, and 0.05 standard deviations. Payne (2010) in Canada. Specifcally, they 5.4.4 India consider the case of Ontario, where two Finally, as noted in section 3.1.3, the experimental design in Andhra Pradesh 56 This brief synopsis is based on correspondence with the authors, as the article cited is in Swedish. In addition, was unique and notable in that random- see the reporting in Fisman (2014). ization involved not only students, but also Epple, Romano, and Urquiola: School Vouchers 483 towns markets. Specifcally, frst some towns be 8 percent lower than in a district with a / were selected for distribution of vouch- housing price premium 15 percent below ers; second, within the towns selected for the average. treatment, some children were randomly Brunner and Sonstelie (2003) analyze a selected to receive the vouchers. This allows 2000 voucher proposal in California. They Muralidharan and Sundararaman (2015) to study opinions on the proposal using data go beyond the usual comparison (lottery win- from a statewide opinion poll conducted ners versus lottery losers) and address poten- three months prior to the vote. The poll asked tial externalities on children who remain in respondents whether they supported the public school. For example, by comparing voucher, their perception of quality at their non-applicants in towns that did not receive local public school, and their income and vouchers to non-applicants in towns that did, demographic characteristics. The authors they can get a sense of negative effects on investigate responses among three groups of children “left behind” in the public sector. home owners: those without children, those The authors fnd little if any evidence of such with children in public school, and those externalities. In short, the gains in perfor- with children in private school. For owners mance found in the tests for Hindi may rep- without children, support for the voucher resent true aggregate-level gains. was inversely related to local public-school quality. This is in keeping with a concern for 5.5 Question 5: What political-economy property values. Households with children in factors determine the existence and design private schools are much more supportive of of voucher programs?—We close our review the voucher, but also at the margin have a of the empirical literature by looking at evi- larger reduction in support as public-school dence related to political economy. Brunner, quality increases. For those with children in Sonstelie, and Thayer (2001) study voting on public school, voucher support was positively the 1993 California voucher proposal using related to public-school quality, though sig- data from 3,786 precincts in Los Angeles nifcant at only the 10 percent level. Brunner County. They take Nechyba (1999) as their and Sonstelie note that this fnding might point of departure, noting that this model emerge if (as Nechyba’s analysis predicts) predicts that a voucher would cause house some households with children in public prices to fall (rise) in neighborhoods with school expect to move to a neighborhood high (low) quality schools. The authors use a with low-quality public schools (low housing hedonic equation to estimate the relationship prices), take up the voucher, and send their of housing prices and school quality—mea- children to private school. Households with suring the latter by scores on standardized children already in private school who choose tests—to estimate the housing price pre- nonetheless to live in a neighborhood with mium for schooling in each district. This a high-quality public school would presum- price premium is then included in a regres- ably not relocate in response to the voucher. sion in which the dependent variable is the Hence, results that at frst glance seem con- proportion of voters supporting the voucher. tradictory can in principle be reconciled. They fnd strong support for predictions with Brunner and Imazeki (2008) extend the respect to housing owners. Holding other analysis of California voting, arguing that variables constant, their estimates imply that higher-income voters’ support for a voucher the difference in the vote favoring vouch- depends on the extent of choice in local ers between districts with a housing pre- education markets. In markets with many mium 15 percent above the average would districts, higher-income households can be 484 Journal of Economic Literature, Vol. LV (June 2017) expected to have paid a substantial housing in some way, provide support for private price premium to locate in a high-quality dis- schools. These include proposals for trans- trict. For such households, a private-school portation for private-school students, in voucher program could adversely affect addition to a variety of voucher models. All home values. By contrast, in low-choice ten referenda were defeated. Kenny then markets, high-income households would turns to a descriptive assessment of factors likely beneft from being able to use vouch- that infuence whether a voucher proposal is ers to pay for private schooling. They use considered by a state legislature, a number block-level voting data from the 2000 ballot of which have been passed or at least sup- initiative (Proposition 38) that would have ported by one chamber, and factors that raise offered a fat voucher of $4,000 per student its probability of success. He concludes that in California. They create an index for choice ideology plays a central role, noting that vir- among public schools and estimate regres- tually all proposals were in states where the sions in which the dependent variable is a Republican Party controlled the legislature, logistic transformation of the fraction of yes and among those, the successful proposals votes. The regressions include income, an were in states with relatively more conserva- interaction of income and the choice index, tive Republicans. Kenny also fnds evidence and demographic controls. They predict that that voucher proposals focused on big-city income will have a positive coeffcient, the districts tend to garner more support. interaction of income and the choice index Kenny (2010) investigates voting on two will have a negative coeffcient, and the sum voucher proposals that have come before the of the coeffcients will be negative. Their pre- US Congress. One, an amendment to the No dictions are supported. Moreover, the effects Child Left Behind (NCLB) Act, would have are quite large and are robust to a variety of allowed federal funds to help children in specifcation checks, providing evidence that poorly performing or unsafe public schools the extent of Tiebout choice impacts voucher attend private schools. The other was to support. authorize a voucher for Washington, DC. Brunner, Imazeki, and Ross (2010) Only four Democrats, found by Kenny to be exploit the idea that votes on the California highly conservative, voted for either. Hence, voucher initiative may signal intent to use Kenny again focuses on an empirical descrip- the voucher. They fnd that support for the tion of the determinants of votes by House voucher by white households with children Republicans. He considers the degree of increased with the proportion of nonwhite conservatism of the legislator—based on students in their children’s schools. No com- Americans for Democratic Action (ADA) parable phenomenon was present either scores—and characteristics of the legislator’s for nonwhite households or for households district: percent urban, percent low income, without children. They provide some evi- percent black, percent teachers unionized, dence that households may be responding to and percent of private-school attendees. Of correlates of race/ethnicity rather than race/ these, the ADA score is highly signifcant ethnicity per se. For example, voucher sup- in the expected direction. The variation in port among nonwhite households with chil- percent teachers unionized is negatively dren increased with the share of nonwhite correlated with voting on the NCLB amend- students with limited English profciency. ment, but essentially uncorrelated with the Kenny (2005) studies support for vouch- position on the Washington, DC vote. Kenny ers, both in referenda and state legislatures. notes this is consistent with teachers’ unions He identifes ten referenda initiatives that, exerting more effort to defeat the NCLB Epple, Romano, and Urquiola: School Vouchers 485 legislation, which would have had impact 6. Conclusion nationwide. Variation in percent black across districts has a relatively signifcant posi- Vouchers have been neither the rousing tive impact on the NCLB vote, but not on success imagined by proponents nor the the Washington, DC vote. This may also be abject failure predicted by opponents. While consistent with legislators voting in constitu- the evidence does not make a case for whole- ents’ interest,57 since constituents would be sale adoption of vouchers, recent theoretical directly impacted by NCLB legislation but and empirical results suggests a need for— not by the Washington, DC voucher. and reasons for cautious optimism about— We saw in our review of theoretical potential gains from improving voucher research on the political economy of vouch- design. ers an emphasis on variation in preferences In high-income countries, research on for education spending across the income the impact of small-scale programs on test distribution, and associated fnancial incen- scores exhibits no consistent, robust pattern. tives for support or opposition to vouchers. While the effects are sometimes adverse and Kenny’s work suggests a greater role for ide- sometimes favorable, it is frequently the case ology in theoretical modeling of preferences that no signifcant impact is found. The most over vouchers. Theoretical analysis of the robust fnding is that voucher threats induce political economy of vouchers also empha- public schools to improve. While signifcant sizes the fscal incentives for adoption. In identifcation challenges arise in this type particular, that research highlights the poten- of analysis, the estimated effects seem to us tial for reducing school taxes if a voucher less reliable and large enough to be educationally than per-student public-school expenditure meaningful and warrant further research. In induces students to exit to private schools.58 addition, recent evidence from small-scale For example, Brunner and Sonstelie (2003) experiments in the United States fnds sub- report that the Legislative Analyst’s Offce stantial gains in years of school for recipients estimates overall fscal cost of the voucher to who had not experienced gains in test scores. be in the range from an increase of $500 mil- While potentially due to differential peer lion to a decrease of $2.5 billion. Thus far, composition between public and private these fscal incentives have not been investi- schools, the effects are large by the standards gated empirically, making this an interesting of the peer effects literature, and therefore open issue for research. encouraging with respect to the impact of vouchers. Nonetheless, the evidence is from a few programs, and hence still too limited to 57 Opinion polls regarding vouchers generate consid- permit generalizations. erable debate about the sensitivity of responses to the phrasing of questions. Overall, however, polls on voucher More encouraging results on the effect of programs tend to fnd greater support among African small-scale programs come from developing Americans than among the overall population. See, for countries. First, there are positive reduced- example, responses to questions (16a) through (16c) in http://educationnext.org/fles/2014ednextpoll.pdf. Eight form fndings from Colombia, although surveys of African Americans were conducted between questions remain as to whether the cen- 1996 and 2008 by Bositis (2008). The proportion support- tral mechanisms that account for these are ing vouchers exceeded the proportion opposed in the eight surveys, with a majority supporting vouchers in fve of the really due to vouchers. Further interesting eight. evidence comes from India. While vouch- 58 We noted above that such fscal gains arise from the ers there delivered modest test-score gains, Milwaukee voucher, although peculiarities of the fnancing result in the gains accruing to Wisconsin taxpayers outside they did so at one-third the cost per stu- of Milwaukee. dent of public schools and with no adverse 486 Journal of Economic Literature, Vol. LV (June 2017)

distributional effects. Such results have not or defnitively to whether this would be pro- been mirrored elsewhere, but may have rel- ductive, but aside from this, these events evance in other developing countries that, highlight the desirability of getting design like India, have dysfunctional public-school elements right, before popular discontent systems (e.g., with severe teacher attendance and political considerations direct voucher shortfalls). Other educational reforms are design. also likely to be effective in such countries, In the case of Sweden’s large-scale voucher and at some level, interventions that increase program, early research with respect to achievement might have higher priority than effects on test scores likewise found little innovations that merely reduce cost. Further, effect. More recent work features evidence the extent to which cost savings—which of signifcant gains, although there are mixed come largely from lower pay to untrained results and concern related to grade infation (e.g., individuals who may be high-school among private schools. Recent research also graduates only), entry-level teachers—can tends to support the fnding that voucher be sustained in the longer term and at higher competition has improved the performance grade levels remains an open question. On of public schools, and that the program the other hand, the observed results might design has contributed to limiting cream improve as new teachers gain experience. skimming. Like in Chile, however, there The evidence on large-scale programs is signifcant discontent with vouchers in raises methodological challenges, and very Sweden, although perhaps not as widespread. much highlights the importance of voucher Interestingly, while Chile historically has had design. For instance, analysis of the frst two low performance in international test scores, decades of the Chilean voucher provided it has been improving; in contrast, Sweden strong evidence of cream skimming and, historically had high performance and has at best, mixed evidence of impacts on test been declining. This juxtaposition is to scores. These adverse fndings—and discon- some extent arbitrary—for example, Chile’s tent with the education system more gener- gains may be larger and more relevant than ally—brought and is likely to bring further Sweden’s decline. The more general point is reforms. Notably, in 2008 the government that aggregate educational performance is introduced greater voucher payments tar- the product of complicated processes with geting lower-income students, and prohib- signifcant lags, and methodologically it is ited tuition “top-ups” (charging more than diffcult to isolate how vouchers affect it. the voucher) for these students at participat- To summarize, the evidence does not make ing schools. Recent research suggests favor- a case for wholesale adoption of vouchers, able effects from this reform and highlights but does strongly suggest the desirability of the desirability of further analysis in this continued experimentation and evaluation. dimension. Recent evidence from the United States Finally, the Chilean case also shows the highlights the attendant challenges. On the importance of getting voucher design right. one hand, some encouraging positive evi- As stated, large protests surrounding the dence on graduation and college attendance school system have been prevalent over the has emerged along with some additional past years. Michelle Bachelet, who returned evidence of competition-induced improve- to the presidency in 2014, made a salient ments in public-school performance. On campaign promise to remove the ability of the other hand, some discouragingly large private voucher schools to operate for proft. negative achievement effects for voucher The existing research does not speak directly recipients have been found. The evidence Epple, Romano, and Urquiola: School Vouchers 487 also suggests that work originating in a sin- Catholic Schools.” Journal of Political Economy 113 gle country or in a single research approach (1): 151–84. 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