Competition Pressures and Academic Performance in a Generalized Vouchers Context

The positive impact that competition has on performance in most industries, has been questioned in the "education industry." The idea that competition is limited, that parents don't choose schools for their children considering quality and that schools do not react to that choice is in the center of the debate on school vouchers. We analyze the prevailing methodology in the literature that relates competition and educational performance and the data used to estimate that impact, and we propose a novel methodology to do so. We estimate such impact. We propose the use of an idea that considers relevant substitutes for each school using various attributes which parents consider when choosing schools, and we estimate the effect of competition pressures on performance for Chile, were more than 90% of the students are covered by a voucher. We use a reveled preference mthodology estimating a logit model for school decisions, and form there, we compute relevant tradeoffs among price, quality and distance to home. The evidence supports the hypothesis that competition has a positive, significant and relevant educational impact on private and public schools.