The Effectiveness of Franchises and Independent Private Schools In Chile's National Voucher Program

There is persistent debate over the role of scale of operations in schools. Some argue that school franchises offer educational services more effectively than small independent schools. Skeptics counter that large centralized operations create hard to manage bureaucracies and foster diseconomies of scale and that small schools are more effective at promoting higher quality education. We can gain insight into this debate by examining school systems where vouchers have been implemented on a large scale and where private school supply (franchises and independent schools) has increased. In 1981, Chile began financing public and most private schools with vouchers. This paper uses 2002 data on over 220,000 fourth-graders to compare Spanish and mathematics achievement in private school franchises, private independent schools, and public schools. Our findings suggest that franchises have a large advantage over public schools, once student and peer attributes and selectivity are controlled for. It appears that there is no statistically significant difference in achievement between public and private independent voucher schools. We also find that further disaggregating private voucher school franchises reduces small franchise advantages and widens the larger franchise advantages. We conclude that, while more research is needed on the factors that may influence an owner to establish a franchise, policies oriented to create incentives for private school owners to join or start up a private school franchise may have the potential for improving educational outcomes.