Effects of Differentiated School Vouchers: Evidence from a Policy Change and Date of Birth Cutoffs

In this paper I study the effects of an increase in school choice by examining a 2008 reform that made the value of Chile's (previously flat, universal) school voucher a step function of student income. This policy increased the proportion of private schools that low income, eligible children could access free of charge from 0.5 to 0.7. I identify the impact of the policy by combining its introduction with variation from a date of birth enrollment cutoff for 1st grade. I show that the differentiated voucher lowered the probability that students used public schools by a small fraction and that these students shifted out of low achievement public schools to enroll in low achievement private schools. Nonetheless, private schools where these students enrolled had better test scores and socioeconomic composition at baseline, and less experienced teachers and smaller class sizes than public schools where they would have enrolled in the absence of the program. Despite the improvement in some school observable characteristics, test scores did not increase for students more likely to move to private schools. Further analysis suggests a rise in test scores for students in public schools. These results suggest that the policy had an overall modest positive effect on test scores, but that this positive effect was caused by responses from public schools instead of by the re-sorting of students into private schools.