education vouchers: global experience & india’s...

Education Vouchers: Global Experience & India’s Primise

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EDUCATION VOUCHERS: GLOBALEXPERIENCE AND INDIA’S PROMISE

Desp i te Hercu lean ef for t s by the Ind iangovernment, our education system has failedto provide access to all and good quality ofeducation to those who are in the school. Overthe years, different approaches have beentried to address these problems but none haveworked well. The reasons for the failure aremany but the result is that we have a two-tier system of government and private schoolswith all the attendant social, polit ical andeconomic problems. Those who can afford, goto private schools; those who cannot, go togovernment schools. The children of the poorhave no op t i on bu t poor ly func t i on inggovernment schools. This gross inequality ofschooling opportunities is the result of ourcurrent approach to education.

In this study we offer education vouchers asa tool to change the way education for thepoor is financed by the government. We firstdiscuss the current ideas of reform, outline anew re fo rm agenda in wh i ch educa t i onvoucher is one ingredient, and then narratethe experience of eleven countries that haveimplemented education vouchers. Some of thele s sons f rom these exper imen t s a rehighlighted and a list of Frequently AskedQuestions concludes the study.

I . CONVENTIONAL REFORMS

The Right to Education Bill 2005 is the latesteffor t by the government and educat ionexperts to bring elementary education to all.There are a few good ideas in the Bill, butthe bas i c approach represen t s ou tda tedthinking and is completely disconnected from

the ground rea l i t ies of today’s Ind ia . I tat tempts to move the countr y towards aCommon S choo l Sy s tem, where thegovernment wi l l dec ide which school thestudent should attend, with the ultimate goalbeing that all students from a given areaattend the same ‘common’ school.

The Common School System is a system thatmany western countries established more thana century ago. Has nothing changed in ourunderstanding of how to provide qual i tyeducation in a century? Should we look atwhat these countr ies had done a centuryear l ier or what they are doing today toimprove their education system? They are, infact , moving away from the regimented,bureaucracy-ridden system that has come torepresent the interests of teacher unions andadministrators rather than of students. Let’slearn from their mistakes, not repeat them.

Another common proposal i s to increasegovernment expenditure on educat ion toabout 6 percent of GDP. The almost doublingof government expenditure on education isbound to have some posit ive impact. Thequestion is whether the impact would be inany way proport ionate to the increase inspending. It is evident that unless we reformthe del ivery system, the extra money i sun l ike ly to mat ch our expec ta t i ons o fimprovement.

Many of the countries that achieved highliteracy rates in the post-war era have rarelyspent anywhere close to the 6 percent of theirGDP. Sou th Korea has spent about 3 .2percent; Japan spends around 3.8 percent,and China 2.6 percent. Student expenditurein the United States is one of the highest butstudent performance is far below the world

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standard. International evidence suggeststhat it is not how much the government spendsbut how it spends that determines the qualityof education.

Gee ta Gandh i K ingdon ’ s s tudy o f U t ta rPradesh (in 1996) documents that expenditureper student in private unaided schools was Rs999, in private aided schools Rs 1827, and ingovernment schools Rs 2008. The learningachievement was however in the directionexactly opposite to the amount of spending.The government spends more than twice thatof private unaided schools and provides halfas much education. Similar results have beenfound in Delhi (Tooley and Dixon 2005) andPunjab (Mehta 2005).

Looking at the quality of government schoolsone may surmise that we do not spend enoughmoney on them. But the real i ty is quitedifferent: the Bangalore Municipal Corporationspends Rs 1,700 per student per month inmunicipal schools! We spend a great deal,just don’t get results.

II. A NEW AGENDA FOR REFORMS

The success of Ind ia ’ s economic reformssuggests one important way to improve oureducat ion sys tem: de l i cense , deregulate ,depoliticise, decentralise. Make schools andco l l eges a c coun tab le no t t o educa t i onbureaucrats (l icensors) but to parents andstudents (customers). Increase choice andcompetit ion in education as we did in theeconomy.

High pr i ces in terms of tu i t ion fees anddonations and long queues for admissions are

signs of shortages. The same paucity ofsupply existed for consumer goods before the1991 liberalisation. We abolished the license-permit-quota raj in the industry and endedthe shortages. But the same license-permit-quota raj stifles our education system.

ED U C AT I O N R E F O R M S

√ Remove the license-permit raj toexpand the supply of education

√ Decentralise and depoliticise decisionsabou t sy l l ab i , t ex tbooks , andexaminations

√ Grant financial autonomy to govern-ment schools and colleges

√ Link government grants with perfor-mance for all education institutions

√ Establish independent rating, certific-ation, and accreditation agencies

√ Fund students, not institutions: Helpthe poor by scholarships, vouchers,and loans

√ Allow for - profit educational institutions

√ Pass private university bill

√ Declare education an ‘industry,’ whereedupreneurs have access to credit andventure capital

To start a new school, one must first acquirean Essentiality Certificate (EC) from educationauthorities. In evaluating the application, theauthorities take into account the number ofexisting schools in the area and whether thereis extra demand for education. These licensingprocedures are as cumbersome as they areunnecessary.

In addition to the Essentiality Certificate, thegovernment has detailed specifications for


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classroom size, playground facility, hiring,firing, and salaries of staff and teachers.Undoubtedly all these regulations are wellintended. But the outcomes more often areper ver se . Deepa laya , a s choo l fo r s lumch i l d ren i n De lh i , ha s been re fu sedrecognition by the government for more than10 years on the grounds that it does not paythe stipulated salary to its teachers. The smallprivate and NGO schools for the poor cannotafford to pay these salaries. Most of themget their teachers to sign for the government-required amount while actually paying whatthey can. Deepalaya refuses to be dishonest.And so it cannot get government recognition.I t s s tudents regis ter at other recognisedschools to appear for board examinations.Does this ser ve the interests of the poorstudents? All the evils of the license-permit-quota raj that we experienced in the industrialsector still haunt our education system.

According to the off ic ia l data, almost 40percent of children in the school-going ageare out of school. A very shocking numberindeed! But it turns out that the governmentdoes not survey private unrecognised schools,so students in schools l ike Deepalaya arecounted as out of school. Most householdsurveys indicate that about six to ten percentstudents are out of school. This implies thatabout 30 or more percent of children are inpr ivate unrecognised schools . These areschools that work out of 2-4 room places andcharge Rs 50 to 200 per month, where we findchildren of domestic help to cycle rickshawpullers. These schools would never be able toafford a playground or pay government salaryto the staff.

The regulations mean well but they overlookthe rea l i t y tha t by pas s ing a l aw the

government cannot guaran tee un iver sa laccess or high quality education. Most ofthese we l l - in tent ioned ru les suf fer f romunintended consequences of promoting thosewho are dishonest and punishing those whoare honest. Similar outcomes occur due tothe requirement that only a non-profit trustor a society can run educational institutions.More time and efforts are spent to hide anddistribute what the Supreme Court permitsitself to call ‘surplus.’ One can make profitby selling roti, kapada, or makan, but not bygiving shiksha.

We should combine the core competency ofthe private and the public sector. Let theprivate sector produce education—build andmanage schools and colleges—and provide itto all who can afford to pay. For those whocannot afford to pay, let the governmentfinance their education through scholarships,educa t i on voucher s , and l oans . Thegovernment s tands a s a guaran to r o feducation, not by producing it but by financingi t . Ins tead of focus ing on the inputs toeduca t i on , t he government ensu re s theoutput—meaningful, high quality learning.This approach combines the efficiency andaccountability of the private sector with theequity and independent supervision of thepublic sector.

The role of the government is to liberate thesupply side, fund the demand of the poor, andmonitor the access and quality of education.Le t t he p r i va te i n i t i a t i ve andent repreneursh ip— for p ro f i t and non-prof i t—govern our schools and col leges.Scholarships, education vouchers, and loanswould offer the same freedom of choice to thepoor as the rich enjoy today.

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I I I . EDUCATION VOUCHERS:FUND STUDENTS, NOT SCHOOLS

Under the current system, the poor have nochoice but to attend government schools. Thegovernment has a monopoly on the education

of the poor. And like any other monopoly, itdoes not serve the interests of its customerwell. How do we then assure better qualityeducation to the poor? How do we breakgovernment monopoly on the poor?

Equal opportunity to rich andthe poor

The idea of Education Voucher is to empowerpoor students so that they can attend a schoolof their choice. The poor will have the samechoice as the rich and schools will competefor all students. The same student who goesto a government school today can take thevoucher from the government and go to anyschool of her choice. Their choice in turncreates competition among schools to attractand re ta in s tuden t s . The cho i ce andcompe t i t i on work ing toge ther p rov ideun ive r sa l a c ce s s and h igher qua l i t y o feducation to all.

Basically the money that governments spendon government schools i s conver ted in toeducation vouchers and given directly to poorstudents . Instead of funding schools , thegovernment fund students.

The education voucher is a coupon offered bythe government that covers full or partial costof education at the school of student’s choice.The schools collect vouchers from students,deposit them in their bank account, and thebank credit their account by equivalent moneywhile debiting the account of the government.No money actually changes hand, only thevoucher moves f rom the s tudent , to theschool, to the government.

In the p re sen t sy s t em, the s choo l s a reaccountable to the government. The vouchersystem makes schools accountable directly tostudents since they pay for their educationthrough vouchers. If the student does notlike the school, she can take her voucher toanother school. Under the voucher system,money follows the student. In the presentsy s tem, money fo l l ows the s choo l . Thesketches above and below capture well thedifferences in the present and the vouchersystem of funding education for the poor.

Present System of Funding Schools


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What are the benefits of educationvouchers?

Ö Cho i ce for s tudents – Today a poors tudent i s not able to avai l of goodeducation because she cannot afford togo to a school at all or she is stuck in apoor performing school. The vouchergives her the money and thereby mobilityto go to any school that she feels wouldgive her good education.

Ö Equality of opportunity – This schemesatisfies the basic human right that allchildren be treated equally and equalopportunity for education to be providedto all irrespective of cash, caste or creed.

Ö I n cen t i ve s fo r s choo l s t o i n c reaseenro lment as we l l as qua l i ty – Therevenue of a school depends on thenumber of students it has—both who paydirectly and who pay through vouchers.Ea ch s choo l wou ld a c t i ve ly so l i c i t

students, including the poor (voucher)s tudents . The resu l tant compet i t ionamong schools would improve the qualityof learning, of infrastructure, of extra-curricular activities. To attract and retainstudents, schools would offer variety ofse r v i ce s tha t s tuden t s and paren t svalue—mid-day meals, transportation,supplementary tutor ia ls , af ter schoolcare. The schools provide these extraservices not because they are mandatedbut because that is the way to keep theirs tudent-customers. More important ly,each school has the incentive to figureout the service that is most valuable toits students. In some cases, it could bemid -day mea l s , i n o the r f reetransportation, or after school care.

Concerns about corruption and leakage in anypublic system are warranted. However a wellde s igned voucher sy s tem w i l l have l e s sleakage than the present system as it puts themoney directly in the hands of those who willpay and benefit from it.

Voucher System of Funding Students

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Types of vouchers

• Vouchers can be ta i lored to sui tspe c i f i c needs o f a coun t r y orlocality:

Where have vouchers beenimplemented?

Voucher programs have been implemented indifferent forms in countries as diverse asSweden, Chile, Columbia, Holland, USA, UK,New Zealand, Bangladesh, Czech Republic andCote d’ Ivorie.

• Vouchers could be allowed to be usedonly across public schools, or publicand private schools.

• Vouchers could be universal (givento all students of school going age).In conc lu s i on , va r ious t ypes o fvoucher schemes have benef i tedthousands of students all over thewor ld in very d iverse countr ies .Educa t ion voucher s g i ve us theopportunity to provide easier accessand better quality of schooling topoor students.

IV. GLOBAL EXPERIMENTS IN EDUCATION VOUCHERS

We review 18 different voucher programs in11 count r ie s , des c r ibe the i r des ign andworkings, as well as outcomes and impact onstudent performance.

1 . Sweden

In Sweden, private enrolment at the primaryschool level was 4.6% in 2001 (EFA) and 5.1%in 2002 (EdStats). At the secondary schoollevel , 3.9% of s tudents at tended pr ivateschools in 2001 (EFA). Private householdexpenditure on education was very low at0.1% of GDP in 2001 (Education at a Glance2004). S imultaneously with the vouchersystem, free choice among public schools wasintroduced (Hepburn 1999).

The voucher program applies to all childrensub je c t t o compu l so r y educa t i on a t theprimary and secondary level. Every schoolapproved by the Na t iona l Agency fo rEduca t ion i s en t i t l ed to pub l i c fund ing .

The Cleveland Program

√ USA’s first publicly funded voucherprogram.

√ Voucher amount = 90% tuition fees,up to $2,250.

√ Low income students were providedvouchers through lottery since thegovernment did not have enoughmoney to give to all.

Findings of the Cleveland Program

√ Paren t s sa t i s f i ed w i th in c reasededucation opportunities.

√ Voucher students in private schoolshad increased test scores in languageand science. These students wereamong the mos t d i sadvan tagedstudents in Cleveland.

√ Te s t s co re s o f voucher s tuden t simproved with time.


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Private schools receive money from municipalschool boards equal to per pupil funding inpub l i c s choo l s 1. Th i s p r in c ip le o f equa lfunding for public and private schools wasintroduced in 1992 for primary and lowerse condar y s choo l s , i n 1994 fo r upperse condar y s choo l s (Bergs t roem andSands t roem 2005 ; Hepburn 1999 ; Wes t1997)2. Since then, the amount of tuitionprivate schools can charge is restricted to thevalue of the voucher. There are several otherrequirements on schools: They must follow anational curriculum and are supervised by theNational Assembly of Education; they mustaccept students on a first-come, first-servedbasis and students are required to take localgovernment examinations four times duringtheir academic careers. On the other hand,there are no restr ict ions on how a schoolshould be owned or managed. Schools do notneed to be independent, i.e. several schoolscan be owned by the same entity or company.Schools are also allowed to make profit.

As a consequence of the voucher scheme, thenumber of pr ivate schools has increasedconsiderably3. Entry barriers are low sincethere are very few lega l res t r i c t ions onopening a private school; however there isincreasing government regulation of privateschools once they have been establ ished.Studying the socio-economic composition ofschools reveals that parents of private schoolpupils are better educated than those of public

school pupils, and they avoid schools withlarger shares of non-Nordic immigrants (Gauriand Vawda 2004).

After the introduction of the voucher system,s choo l s were g i ven a l a rge degree o fautonomy. Although certain requirements onschools existed, such as achievement targetsand the rule that teaching should be non-confessional, there was little supervision ofschools. As achievement targets were not metand there was public concern about the qualityas well as about practices in some religiousschools, demand for stricter regulation andmore government intervention arose. Thisleads Sandstroem (2005) to conclude thatminimal but strict regulation is necessary toensure private school independence in thelong term.

Impact of Vouchers on AcademicAch ievement

Bergstroem and Sandstroem (2002) describea positive effect of competition by privateschools on academic achievement in publicschools, which is statistically significant in halfo f t he ca se s s tud ied . The da ta u sedinformation on grades, test results and socio-economic background of 28,000 students inthe ninth grade for both public and privateschools in the academic year 1997/1998.Regression analyses were carried out both atthe individual level and at the level of average

1 A problem reported about this distribution mechanism is that municipal school boards were sometimes reluctant to handover funds that were previously used for municipal schools to private schools.2 The relative amount of private school funding changed twice between 1991 and 1997: from 85% to 75% to 100% ofmunicipal schools’ funding per student.3 According to different sources, the number of private schools is growing by 0.5 -1.0% per year; i.e. educating about 3500more students every year (Hepburn). The share of private schools increased from 1% in 1991 to 4% in 2002 (Gauri andVawda 2004). Between 1992 and 2002, the private primary schools increased from 106 to 488, and lower secondaryschools from 16 to 149 (Bergstroem and Sandstroem).

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s cores in muni c ipa l i t i e s . In bo th cases ,contro l l ing for severa l var iab les such asparents’ education and income as well as theinitial public school quality in the municipality,the authors find that in all cases they studied,the academic achievement of s tudents inpublic schools is better when the share ofs tudents at tending pr ivate schools in themunicipality is higher.

2 . Czech Republ i c

In the Czech Republic, private enrolment isvery low at the primary level, around 1% oftotal primary enrolment in 2001 and 2002(EFA; EdStats). For private secondary schools,sources slightly differ, reporting around 6-13%of total secondary enrolment within the timeperiod from mid 1990s to 2002.4 Privatehousehold expenditure on education was 6.1%of total expenditure on educational institutionsin 2001 (Education at a Glance 2004).

The introduction of a voucher scheme in theCzech education system was motivated by theend of communism and an excess demand foreduca t i on . Add i t i ona l l y, pedagog i ca lweaknesses were seen in the public schoolsystem and some parents distrusted publicschools due to the role these had played inthe communist system. The scheme appliesto all students, in private as well as in publicschools. All schools receive public fundingbased on the number of students enrolled.However, payments are not equal for publicand private schools. Government funds toprivate schools are allocated in two ways: First,they receive some base support corresponding

to 50% of public school funding per student;se cond , p r i va te s choo l s a re awardedsupplementary support tied to their quality,which is assessed by local school offices basedon fixed criteria. In total, private schoolsreceive 60-90% of public school funding perstudent; they are allowed to charge additionaltuition (Filer and Munich 2000).

As a consequence of the voucher scheme, Filerand Munich (2000) report little increase inprivate primary schooling, but a relativelylarge impact at the secondary school level.By the mid 1990s, the number of privatesecondary schools had increased from 0% in1990 to 25% of secondary schools enrollingaround 13% of secondary students.

3 . I ta ly

Educational vouchers meant to improve schoolchoice have been introduced in Italy between2001 and 2003 in e igh t ou t o f twen tyregions 5. The exact design differs acrossregions, but in all of them the governmentsubsidises tuition fees at private primary andsecondary schools. In most regions this isorganised as an ex-post reimbursement oftuition expenses given to students. The valueof the voucher differs considerably across thecountry. The national government providesfunding of 150-200• per student, dependingon the total number of applicants, but thisamount can be supplemented by regionalfunds; therefore the amount students receivevaries across the country.

F ive reg ions have an upper l imi t to thevoucher value, which ranges from 1875•

4 The figures are: 13% in mid 1990s (Filer and Munich 2000); 9.8% in 1998 (Gauri and Vawda 2004); 6.7% in 2002 (EFA);7.09% in 2002 (EdStats).5 Nine regions adopted legislation for a voucher program and eight of these allocated funds to it for actual implementation.


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(upper secondary school in Piedmont for apoor household) to 210• (primary school inVeneto for a middle income household) .General ly, the voucher covers 25-80% oftu i t ion fees . In a l l excep t two reg ionseligibility for the voucher program dependson family income. In the remaining tworegions, e l ig ib i l i ty i s based on academicachievement. The school receiving voucherfunds has t o be ce r t i f i ed , i . e . l ega l l yrecognised by the government. This requiresapproval of the curriculum by the Ministry ofEducation and implies open admission to allsolvent students who apply.

Brunello and Checchi (2005) find a trendtowards h igher p r i va te enro lmen t a s aconsequence of education vouchers. However,they voice concerns about the potential of thevoucher program in increasing the quality ofpublic schools by private competition, becausethey find private schools to be of rather lowerthan higher quality compared to governmentschools . The impact of vouchers on thequality of education in public and privateschools has yet be assessed.

4 . Colombia

In Colombia around one fifth of students areenrolled in private schools.6 The voucherscheme was introduced in 1992 as part of ala rger re fo rm program a imed a tdecentralisation and privatisation of publicservices. The introduction of educational

vouchers in particular was motivated by thefact that public schools had reached capacitylimits and that the secondary enrolment ratewas only 75% (and as low as 55% for thepoorest quintile of the population). The maingoal of the voucher scheme was to enable poorstudents to attend secondary school in areaswhere public schools had reached capacitylimits and thereby to quickly increase schoolcapacity and secondary school enrolment rates(Angrist et al. 2002; Gauri and Vawda 2004)7.

Accordingly, the Colombian voucher system isspecifically targeted at students from low-income families, more specifically at studentsentering the sixth grade and living in low-income areas, who have previously attendedpublic primary schools and who do not find aplace in public secondary schools (Gauri andVawda 2004; Turbay 2000).8 These studentsre ce i ve voucher s—co- f inanced by thenational government (covering 80% of thecos t s ) and par t i c i pa t i ng mun i c i pa l i t i e s(covering 20%)—to be used to pay for tuitionat private schools. The municipalit ies areresponsible for administration of vouchers.The a l l o ca t i on o f voucher s amongmunicipalities is determined by agreementsbe tween the na t i ona l government andmunicipalities, taking into account the totalnumber of vouchers available in the specificyear, the local necess i t ies as wel l as theest imated number of open places in localprivate schools (Turbay 2000).

6 Private enrolment as a share of total enrolment was 18.8% at the primary school level and 28.1% at the secondary levelin 2001, according to EFA; according to EdStats the figures for 2002 are 17.09% and 24.07% respectively.7 In 2002 the government started another reform initiative called ‘revolucion educativa ’, under which 1.5 million newplaces in schools were planned to be created by 2006, partly targeted at students from vulnerable parts of the population(Ministerio de Educacion National). By 2005 43% of these have been installed (eltiempo.com).8 A neighbourhood is classified as ‘low-income ’ if it falls into the two lowest socio-economic strata (on a scale of 6 strata);residence in the neighbourhood has to be proven by presenting a utility bill (Angrist et al. 2002).

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Before applying for a voucher, a student hasto be accepted by a private school participatingin the program. If the local demand exceedsthe mun i c i pa l a l l o tmen t , voucher s a reallocated among applicants by lottery9. In1997 , voucher s were g i ven to 125 ,000students, corresponding to 1% of nationalsecondary enrolment (Gauri and Vawda 2004).Students receive vouchers three times a yearand forward them to their school directors;these get paid the value of the voucher fromthe ministry and the municipalities (Turbay2000). The value of the voucher was initiallyset an amount equal to the full tuition at low-cost private schools. However, i t was notindexed to inf la t ion , therefore , in 1998vouchers covered only about 50% of tuitionand had to be supplemented by private means.Once a voucher has been awarded to a student,the funding is automatically renewed until theend of secondary school if the student keepsbeing promoted to the next grade.

In order to receive voucher funds, a schoolhas to be situated in one of the participatingtowns, which include all major cities. Almost50% of private schools in the 10 largest citiesaccepted vouchers in 1993 (Angrist et al .2002), but most ‘elite’ private schools did notparticipate in the program. New for-profitprivate schools emerged after the introductionof educational vouchers, however, based onconcerns about the low qual i ty, for-profi tschools were excluded from the program in

1996. Funding for public schools was notreduced if enrolment decreased due to thevoucher scheme (Angrist et al. 2002; Gauriand Vawda 2004).

According to information from the ColombianMinistry of Education, secondary enrolmentincreased during 1992 and 1997 from about55% to about 65%. 10 There has been ageneral upward trend in secondary enrolmentbetween 1960 and 2002; though the increaseis particularly pronounced during the early1990s, th is may or may not be causal lyrelated to the voucher program.

The educa t i ona l a ch ievemen t l eve l s i nvoucher schools are very close to test scoresin public schools and significantly lower thanin non -voucher p r i va te s choo l s . 11 Thestudent-teacher ratio and available facilitiesare similar in voucher schools and publics choo l s ; fu r thermore , many teachers a tvoucher schools are former publ ic schoolteachers (Angrist et al. 2002).

5 . Ch i l e

Private education plays an important role inthe Chilean school system, with about half ofthe students attending private institutions.12

Private household expenditure on educationis also relatively high, with 42.6% of totalexpenditure on educational institutions beingcovered by private households (Education ata Glance 2004).

9 The municipalities decide on the number of vouchers, subject to a maximum allocated to them by the national government(Angrist et al. 2002).10 These figures for secondary enrolment in 1992 are different from those given by Angrist et al. (55% [Ministry] vs. 75%[Angrist]).11 As mentioned in the case study, also a couple of new, for-profit private schools emerged in response to the voucherprogram, which were considered to be of low quality. Therefore for-profit schools were excluded from the program.12 Private enrolment as percentage of total enrolment was 45.5% at the primary school level, 49.7% at the secondary schoollevel in 2001 (EFA).


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In 1981, as part of a broader program ofl i be ra l i s i ng the e conomy, the P inoche tgovernment i n t roduced an educa t i ona lvoucher sy s tem and s imu l taneous lydecentral i sed the publ ic school sector bytransferr ing the adminis trat ion of publ i cschools from the Ministry of Education to themunicipalities (Contreras 2002; Hsieh 2003).The objectives of the program were, first, tofoster competition among schools, therebyimprov ing the qual i ty of educat ion, andsecond, to reduce government spending oneducation13 (QPEC Factfile n.d.).

The voucher program is publicly funded andapplies to all children of school-going age whoattend participating primary and secondaryschools. Funding is allocated to public andprivate schools on an equal basis, strict lypropor t iona l to the number o f s tuden t senrolled in each school (Contreras 2002; Gauriand Vawda 2004; Hsieh 2003; West 1997).For private voucher schools, the money isd i rec t ly pa id to the s choo l s . For pub l i cschools, it is given to the respective localadmin i s t ra t i on , i . e . u sua l l y t o themunicipality, which distributes it among thepublic schools in its district. However, thisdistribution does not necessarily reflect theexact differences in enrolment across schoolsin this municipality (Auguste and Valenzuela

13 Public spending on education initially decreased from 5.3% of GNP in 1985 to 3.7% in 1990, but later spending increasedagain to over 5% of GNP (QPEC Factfile).14 The voucher value was initially corrected for inflation, but after the economic crisis in the early 1980s this was not doneanymore.15 Despite public schools not charging tuition their average resources per student are close to those of private voucherschools (US$ 172.5 per year per student for public schools vs. US$ 181.1 for voucher schools in 2000, including voucherpayments). One reason for this is that after 1990 targeted subsidies were introduced for low performing schools, whichbenefited mostly public schools. Some public schools also receive additional funding from the municipalities (Auguste andValenzuela 2003).16 In 2000, 71% of the voucher schools charged tuition. Since 1997, these schools are legally required to have an explicitscholarship policy; effectively 66% of their students paid tuition in 2000 (Auguste and Valenzuela 2003).

2003). The value of the voucher var iesdepending on location and level of education(Carnoy and McEwan 1999).

Initially, private schools were not allowed tocharge additional tuition above the vouchervalue, but as the real value of the voucherdeclined due to inflation14, this regulation wasabol ished in 1993. Now private voucherschools may charge tuition15; the value of thevoucher given is lower for schools with highertuition fees (Auguste and Valenzuela 2003;Carnoy and McEwan 1999)16. Even though thevalue of the voucher is equal for public andprivate schools, public schools receive moregovernment funding in reality via additionalsubsidies. For instance, no publ ic schoolclosed due to a loss of students, because ifnecessary, public schools have received extrafunding to pay their teacher-salaries (Sapelli2005) . Fu r the r, t he government g i ve stargeted subsidies to public schools in low-income areas, e .g. for textbooks, schoolmater ia ls and food. These subs id ies are‘nonportable’, i.e. they are tied to a specificschool, so that a student who changes to adifferent school will not be able to benefitfrom these subsidies anymore. This works asa disincentive for students to exercise schoolchoice (Sapelli 2005; Sapelli and Torche Fecha2002).

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17 Public school teachers’ salaries and working conditions were no longer determined by the Escala Única de Remuneracionesbut by the more liberal Código de Trabajo. This implied a loss of “guarantees of job security, the right to salary duringvacations, standard wage scales, a 30 hour work-week, and the right to collectively bargain” (Carnoy and Ewan 1999,p.5).18 These schools had mostly been charging tuition fees before the reforms, as opposed to other private schools (mainlyreligious ones) that did not charge tuition and received state subsidies (covering about 30% of their costs in 1980) evenbefore the voucher program was introduced (Carnoy and Ewan 1999; Hsieh 2003).

There i s a h igh degree o f governmentregulation of private schools, e.g. concerningschool administration, curricula, buildings andqualification of teachers. Also, entry into themarket is restricted as establishment of a newprivate school requires government approval,which is only granted if there is no excesssupply of schools . In addi t ion i t impl iesregulation of staff, teaching materials andbui ld ings. Teacher-sa lar ies are centra l lynegotiated and therefore cannot be decidedupon autonomously by the school (Merrifield2005). On the other hand, as opposed topublic schools that have to admit all studentsthey can accommodate within their capacity,p r i va te voucher s choo l s may f ree ly se tadmission criteria (Auguste and Valenzuela2003).

With the introduction of the reforms in the1980s, h ir ing and f i r ing of teachers wasfacilitated, as public school teachers’ contractswere revoked, they lost their status as civilservants and had to give up a number ofrights.17 Private school teachers also lostsome legal rights, such as minimum wageguarantees and provisions for annual wagead jus tment (Carnoy and McEwan 1999) .Abolishing the teachers’ union and therebysuppressing potential opposition by teacherswas possible because Chile was ruled by amilitary regime at this time. The teachers’un ion was re in t roduced by the new(democratic) government that came into powerin 1990. The government also increased

min imum teacher wages a s we l l a s thevoucher va lue (Augus te and Va lenzue la2003).

As a consequence of the voucher program, thenumber of pupils enrolled in private voucherschools increased from 15% of total enrolmentin the early 1980s to 33% in 1996; todayalmost one half of Chilean students attendprivate schools. Accordingly, enrolment inpublic schools declined, but almost no publicschool closed (Gauri and Vawda 2004). In1996, about 91% of students were enrolledin public and private voucher schools (Carnoyand McEwan 1999), so most of the schoolingin Chile is voucher-financed. However, thepr ivate s choo l s that have chosen not toparticipate in the voucher program have thehighest academic achievement levels (Hsieh2003; Contreras 2002)18.


Contreras (2002) uses individual level scoresfor 1998 from the Academic Aptitude Test(PAA) to assess the impact of attending apr i va te voucher s choo l on a cademi ca ch ievement . Th i s co l l ege en t ranceexaminat ion was taken by about 80% ofstudents who were in the fourth year ofsecondary school. After controlling for ageand parental education, and availability of avoucher school in the student’s community,the pos i t ive impact of the probabi l i ty of


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a t tend ing a p r i va te voucher s choo l onach ievement i s s i gn i f i can t . The re fo re ,Contreras concludes that the voucher systemincreases academic achievement as measuredby the PAA.

While Contreras’ (2002) findings show thatstudents in private voucher schools performbet te r than the i r counterpar t s in pub l i cschools, Ramos’s analysis shows that thisc la im does not hold for the subgroup ofs tuden t s f rom a l ow so c io -e conomi cbackground. Ramos (2002) uses scores instandardised tests, averaged at the schoollevel , in his analysis of the eff ic iency ofprivate voucher schools compared to publicschools. The scores describe fourth graders’achievement in mathematics and Spanish in1996. Comparing achievement across schooltypes, Ramos finds that scores in private non-voucher schools are significantly higher thanin voucher s choo l s and pub l i c s choo l s ;however private voucher schools perform onlyslightly and not significantly better than publicschools. In the rest of the analysis, onlyprivate voucher schools and public schools arecompared. Based on severa l regress ionmodels, the author concludes that studentsf rom lower so c io -e conomi c backgroundperform bet ter in publ i c than in pr ivatevoucher schools, but students from a moreadvantaged background will do better in aprivate voucher school than in a public school.

It is pertinent to ask if the overall averageachievement in the country has increased asa consequence of the voucher scheme. Thereis the possibility that vouchers benefit thosewho are enabled to attend private voucherschools but have a negative effect on students

remaining in public schools. This informationis needed to assess whether the voucherscheme improved the quality of education onthe whole. According to Carnoy and McEwan(1999) a high concentration of private schoolsin a community had a small positive effect ontest scores in public schools in the capital city,equal to 0.2 standard deviations in test scoresover 15 years. In the rest of the country theyfind a small negative effect.

Auguste and Valenzuela (2003) test the effectof competition created by voucher schools onaverage achievement at the county level aswell as the effect of competition on sorting ofstudents across schools. Data on individualscores in standardised achievement tests isobtained from the System of Information andMeasurement of the Educat iona l Qua l i ty(SIME) for grade 8 in the year 2000. Theresults show a moderate positive effect ofcompetition on average achievement in thecounty 19. Further, concerning the sort ingaspect, competition results in larger socialstratification across schools as measured byparents’ education. Auguste and Valenzuelaalso report differences in achievement acrossschool types; students in private non-voucherschools have higher test scores than those inprivate voucher schools, and these in turnhave higher test scores than public schoolstudents. The results of the data analysisrevea l t ha t compe t i t i on amp l i f i e s t hedifference in performance.

Overa l l , Auguste and Va lenzue la (2003)conclude from their est imates that at thedistrict level competition from private schoolsimproves the qual i ty of educat ion. Eventhough competit ion leads to higher social

19 An increase of competition by one standard deviation corresponds to an increase of approximately 0.4 standard deviationin average achievement at the county level.

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s t ra t i f i ca t i on and l a rge r d i f f e rence s i nacademic ou t comes ac ros s s choo l t ypes ,average achievement in the district increaseswith competition.

Looking at the country as a whole, Hsieh andUrquiola (2003) find no change in nationalaggrega te i nd i ca to r s o f educa t i ona lachievement after introducing the voucherprogram. First, the median score of Chileanstudents in the TIMSS20 study has not changedrelative to the median score in other countriesbetween 1970 and 199921.

Second, based on their own analysis of datafor 150 Chilean municipalities, they find thatacademic achievement did not rise faster incommuni t ie s w i th a la rger expans ion ofprivate education, i.e. a higher impact of thevoucher program. On the contrary, averagerepetition rates appear to have worsened inthese municipalities relative to other areas.

Carnoy (1997) also assesses the developmentof overall academic achievement in Chile afterthe introduction of the voucher system. Hereports that ach ievement in Spanish andmathematics measured by average scores ofpupils in grade 4 in nationally standardisedachievement tests fel l between 1982 and1988. For the period after 1988, Carnoyreports different results based on two studiesby Rounds Parry and by Espinola. Analysingthe average resu l t s o f the s tandard i sedachievement tests in 1990, the conclusion canbe reached that average achievement in 1990was back a t the same leve l as in 1982;however the second study cited by Carnoy

(1997) reports declining average test scoresbetween 1988 and 1990. Both of thesestudies f ind that in middle-income areas,p r i va te s choo l s had h igher ave rageachievement than public schools, but in thelowest-income areas, average scores werehigher in public than in private schools. In1990, public spending on education as wellas the value of the voucher were raised bythe new government. In addition, schools inlow-income areas received targeted fundingand technical assistance. After this, Carnoy(1997) describes an increase in test scoresbetween 1990 and 1992 in public as well asin private schools. Overall, he concludes thataverage test scores have stayed constant orincreased slightly during the first 13 years inwh i ch the voucher sy s tem has been inexistence (between 1981 and 1994).

Us ing da ta o f 5000 s choo l s on thestandardised achievement test SIMCE for theperiod 1994-1997 and controlling for severalvariables concerning characteristics of theschools analysed, e .g . , re la ted to soc io-economic s ta tus and urbanness , Ga l lego(2002) f i nd s s i gn i f i can t t he e f fe c t o fcompetit ion on average test scores at theschool level. Running separate regressionmodels for the subgroup of public schools andthe subgroup of pr ivate voucher schools,Gallego finds that the effect of competitionis stronger for private voucher schools thanfor public schools. He offers the explanationthat private voucher schools face strongerincentives to respond to competition than dopub l i c s choo l s . Fur thermore , for pub l i cschools the effect becomes insignificant in the

20 Trends in International Mathematics and Science Study (formerly Third International Mathematics and Science Study), seewww.timss.org.21 The Chilean voucher system has existed since 1981 (see case studies).


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ater years (1996/1997) because of thetargeted funding to low performing schoolsthat was introduced during the 1990s. As theprogram mainly benefited public schools andwas po ten t i a l l y fo cused on those i ndisadvantaged rural areas, where there islittle competition by private schools, its effecton public school quality in areas with lowcompetition might have overcome a positiveeffect of compet i t ion in other areas anddistorted the overall results.

To sum up, the research on the Ch i leanvoucher program sugges t s that s tudentsachieve better academic results in voucherschools than in public schools. This holds truelargely for students from a higher socio-economic background, who make up most ofthe enrolment in private voucher schools.Furthermore, competition by private voucherschools improves overall achievement at thed i s t r i c t l eve l , desp i te l ead ing to h igherdisparities across school types. Also at theschool level, competition from private voucherschools has a positive impact on educationalquality, this effect is stronger for privatevoucher schools than for public schools. Atthe national level there is no or at most slightimprovement i n overa l l a cademi cachievement.

6 . Cote d’Ivoire

In Cote d’Ivoire, 10.9% of primary schoolstudents attended private schools in 2001 and2002 (EFA; EdStats)22 and 36.2% of secondaryschool students received private education in1995 (EFA).

Under the voucher program, 42% of privateschool students receive direct or indirect publicfunding (Gauri and Vawda 2004). At theprimary school level, state subsidies are paidto pr ivate schools. For secondary schooleducation, vouchers are given to students toattend private schools which are classified into“authorized” and “chartered/associated”,on ly “char tered/assoc ia ted” s choo l s areeligible for public subsidies (Sakellariou andPatrinos 2004).

At the primary level, the amount of fundingi s nego t i a ted w i th umbre l l a g roups fo rreligious and secular schools and varies withschool location and tuition fees23 and is onlyloosely l inked to enrolment numbers. In1999, these state subsidies for primary schoolsamounted to $40–66 per student.

At the secondary level, funding is directly tiedto enrolment, as the state sponsors specificstudents to attend private secondary schools.The value of this voucher was $200 at lowerse condar y s choo l s and $233 a t h igher-secondary schools in 1999. This amount ish igher than the tu i t ion fees a t low-cos tsecondary schools and about 1/10 of tuitionat the best private schools (Gauri and Vawda2004; Sakellariou and Patrinos 2004). Aprivate school must meet certain conditionsin order to qualify for public funding. Theschool must have been in operation for at least5 years, it must have certified teachers for atleast the last 3 years and class size has to bel im i ted to a max imum of 45 s tuden t s .Furthermore, the schools’ tuition fees may notexceed 40,000 CFA per year outside Abidjan

22 According to Gauri and Vawda (2004), 13% of primary school pupils are enrolled in private schools.23 Higher funding is paid to schools outside Abidjan (the largest city and former capital of the country); the higher theamount of tuition charged, the lower the subsidy the school receives.

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or 30,000 CFA in Abidjan and the school musthave ach ieved at leas t nat iona l averagesuccess rates in examinations for the last 3years (Sakellariou and Patrinos 2004).

One particularity of the education system inCote d’Ivoire is the high share of religiousinstitutions among private schools. In additionto tu i t ion fees and publ i c funding, theseschools receive money from church funds.About 50% of the private education sectorconsists of religious school; most of them areCatholic. At the primary school level, religiousschools outnumber secular schools; at these condar y l eve l t he oppos i t e app l i e s .Religious schools have a reputation for thehighest quality.

7 . Denmark

In Denmark, the share of students attendingprivate schools in 2001 was 11% of totalen ro lmen t bo th a t the p r imar y and thesecondary school level (EFA). 3.9% of totaleducational expenditure in 2001 originatedfrom pr ivate households (Educat ion at aGlance 2004). Students are assigned to apub l i c s choo l by the mun i c ipa l i t i e s ( fo rprimary schools) or by the counties (secondaryschools). Free school choice among differentpub l i c s choo l s i s g radua l l y i n t roduced ;authorities can allow for school choice but donot have to. However, there is free schoolchoice among public specialised vocationals choo l s and ever y s tuden t has theconstitutional right to opt out of the publicsystem in order to attend a private school(Justesen 2002; Hepburn 1999).

The objectives of the voucher system are toimprove consumer respons iveness in theeducational market and to enhance efficiencyand student performance. The system appliesto all students attending private primary andsecondary schoo l s and pub l i c vocat iona lschools. Since 199224, private primary andsecondary schools receive a subsidy for eachstudent, which covers 80-85% of the cost(Justesen 2002). For the remaining amount,the government does not only allow, but evenrequires private schools to charge tuit ionabove the value of the voucher, except in caseof undue financial hardship (Gauri and Vawda2004). Low-income families can apply forexemption from tuition fees at private schools(Justesen 2002). The value of the vouchervaries with the size of the school, smallerschools receive up to 1.45 times higher percapita funding (Hepburn 1999.). Funding ofpublic vocational schools is allocated via a‘ tax ime te r sy s tem’ based on s tuden tenrolment and covers 100% of the costs.

In general, a private school has to meet anumber of criteria to be eligible for publicfunding. It must be managed by a board witha parent majority and has to follow nationalguidel ines on the curriculum, on nationalexams as well as on teacher salaries andteaching time. Additionally, the school mustenrol a minimum of 28 students and has tobe independent from other schools. On theo ther hand , p r iva te s choo l s a re f ree indec id ing on re l i g ious and pedagog i ca lprinciples. Furthermore, despite adhering togeneral guidelines on the curriculum they canemphasise specific subjects or offer additionalones (Bergstroem and Sandstroem 2005;

24 Before 1992, private schools were reimbursed with a fixed percentage of their expenditures, which proved to be toobureaucratic and did not provide any incentive for an efficient use of financial resources (Justesen 2002).


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Justesen 2002). While the quality of publicand private schools is generally equal, privateschools distinguish themselves by alternativesapproaches to education (Hepburn 1999).

According to Justesen (2002), during the1990s the number of private schools increasedby 8% whereas the number of public schoolsdec l ined by 6% as a consequence of thevoucher s cheme. Th i s process has beenfacilitated by the legal system that sets littlerestrictions on opening a new private school.Among public schools, with the exception ofvocational schools, there is little competitionas there is no free school choice (Justesen2002). Between public and private schools,however, a compe t i t i on e f fe c t can beobserved. Government schools adopt somepractices of private schools, such as moreparental involvement by establishing schoolboards with a majority of parent members.Additionally, free choice among public schoolswithin a municipality is gradually introduced(Hepburn 1999). After the introduction of thevoucher system, private schools have becomeaffordable to all strata of society (Justesen2002) and the public perception of the qualityof government schools has improved (Hepburn1999).

David-Evans et al. (2004) criticise the Danishpub l i c s choo l sy s tem fo r re la t i ve ly l owach ievement re su l t s i n i n te rna t i ona lcompar i son 25, wh i ch range a round theinternational average and are lower thanscores in comparable other Scandinavian

countr ies , and Canada and the UK 26. Inaddition, they point out the “the lack of as trong cu l ture of s tudent evaluat ion andconsequent inadequate feedback” (p.4). Theauthors describe teachers’ dedication as wellas the decentralised system, which gives roomfor innovation, as strength of the system. Inspite of this, they disapprove of “too littlesharing of good pract ice” among schools,which hinders the spread of new ideas.

8 . The Nether lands

In the Netherlands, around 68% of primaryschool s tudents were enro l led in pr ivateschools in 2001 and 2002 (EdStats ; EFA;Ju s te sen 2002) . Fo r se condar y s choo lstudents, the share is slightly higher with 73-83% in the same years27. Compared to thesefigures, private household expenditure oneducation is very low, amounting to 5.7% oftotal expenditure on education (Education ata Glance 2004).

The Dutch voucher sys tem appl ies to a l lstudents subject to compulsory education inthe whole country (West 1997). Governmentfunds are paid to both public and privateschools based on the number of s tudentsenrolled; schools are not allowed to chargeadditional tuition fees. Equal public fundingto public and private schools is guaranteed bythe Cons t i t u t i on . I n the ca l cu la t i on o ffunding, s tudents are weighted by soc io-economic background28, so that more moneyis paid for taking poorer students.

25 The Danish average scores in the studies quoted are: IEA Literacy Test 1991: 3 rd grade score: 475, 8 th grade score: 525;IEA TIMSS 1994: mathematics: 502, science: 478; OECD PISA 2000: reading: 497, mathematics: 514. All scores are relativeto an international average of 500.26 Their criticism focuses on public schools because these make up almost 90% of all schools.27 For 2001: 83.2% according to EFA and 73.0% according to Justesen. For 2002, EdStats reports 83.26%.28 classified into 5 categories

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There are detailed regulations on schools inorder to be eligible for public funding. Theymust follow a fixed curriculum and conductnational exams at the end of primary andsecondary school. Class size as well as teacherqualifications and salaries are equally subjectto regulation. Furthermore, a minimum schoolsize is required: A new primary school mustenrol at least 333 students in cities, and 200students in rural areas for a period of fiveyears to qual ify for government funding.S imi lar leg is la t ion has been adopted fora l ready ex i s t ing s choo l s . Never the les s ,private schools are granted a certain amountof freedom, as they can freely decide onteaching methods, course books and material;they may set admission criteria and are freeto choose the content of 120 teaching hoursper year (Justesen 2002).

After the guarantee of equal funding to publicand private schools had been adopted into theconstitution in 1917, the number of privateschools increased and within few years 70%of students attended private schools. Theequal funding base for all students impliesentirely free school choice for all students andtherefore a high degree of competition amongboth publ ic and private schools (Justesen2002) . There are d i f ferent op in ions onwhether the voucher system has fosteredsocial differentiation across schools. WhileJu s te sen (2002) f i nd s no s i gn i f i can tdifference in social composition of the studentbody in public and private schools, Fiske andLadd (2000) report growing ethnic segregationbetween schools.

9 . New Zealand

In New Zealand, around 2% of primary schoolstudents 29 receive private schooling. Thecorresponding share of secondary schoolstudents was 11.3% in 2001 (EFA).

A pilot voucher program was carried out aspart of a more general reform of the educationsystem towards gradual l iberalisation anddecen t ra l i sa t ion , known as ‘ Tomorrow’ sS choo l s ’ . Th i s r e fo rm in c ludes thetransformation of government schools into de-zoned charter schools, the creation of anautonomous government agency (EducationalReview Office) to assess the schools and asma l l voucher p rogram fo r l ow- in comestudents. The national curriculum guidelineswere also changed. Direct funding to schoolsfor all expenses on a per pupil basis wasopposed by teachers’ unions. However, astepwise implementat ion in some schoolsproved successfu l , therefore th is way offunding was expanded up to 23% of schoolsin 1998. Neverthe less , teacher sa lar iesremain funded by the government accordingto a c tua l expenses and a re nego t i a tedbe tween s choo l s and the m in i s t r y o feducation. As part of the reform, schoolchoice among public schools has been entirelyliberalised (Fancy 2004; Gauri and Vawda2004; Hepburn 1999.).

The objective of the pilot voucher program wasto improve educational achievement of low-income families and give them the possibilityto obta in the educat ion of the i r cho i ce .Publicly funded vouchers to pay tuition feesat private schools were given to 160 students

29 2% in 2001 (EFA), 2.06% in 2002 (EdStats)


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f rom fami l i e s w i th an i n come be lowNZ$25,000. There was excess demand,therefore not all applicants received a placein the program. The vouchers cover the fullp r i va te s choo l tu i t i on in add i t i on to anallowance of NZ$900 for primary students andNZ$1,100 for secondary students, which isintended to cover addit ional expenses onun i fo rms , books and ex t ra - cu r r i cu la ractivities.

In the process of decentralisation, authorityhas been t rans fe r red f rom the cen t ra lDepartment of Education to individual schoolsmanaged by parent elected boards (Hepburn1999; West 1997). Schools have free controlover teacher h i r ing , opera t ing budget s ,selection of academic missions, student feesand loca l fundra i s ing (Gaur i and Vawda2004).

Due to its l imited scale, the pilot voucherprogram as such cannot be expected to havea signif icant impact on overal l quali ty ofeducation in the country. However, since thederegulation of school choice, there has beena certain degree of competition among publicschools. As the amount of operating funds aswell as salary scales and prestige for principalsare linked to the number of students enrolled(Gauri and Vawda 2004). On the other hand,a restriction on competition is posed by theregulation that no new school is allowed toopen if there is sufficient space in existingschools (Hepburn 1999).

Some problems have been observed during theimplementation of the educational reforms inNew Zealand. These should not be regardedas consequences of the voucher program in anarrow sense but rather as resulting from

overall reforms, including school choice. First,the supply of education is restricted by a rulethat no new schools are allowed to open ifthere is space in existing schools; this has ledto some students and teachers being stuck inlow quality schools because better schoolshave reached capacity limits (Hepburn 1999).Second, there is a higher degree of socio-economic s trat i f i cat ion across schools , asschools serving mainly disadvantaged groupsexperience declining enrolment and highershares of minority students, while there isrising enrolment and steady or falling shareo f m inor i t y s tuden t s i n s choo l s se r v ingadvantaged populations (Gauri and Vawda2004). This development poses a problem,because it led to a concentration of difficult-to-teach students in some public schools inlow-income urban areas. Despite the poorquality of these schools, the government didnot close them for political reasons; no newschools were established in these areas andthe schools had problems in retaining andattracting high quality teachers (Fiske andLadd 2000).

Studies of the effect on achievement of thevoucher program as such are not available forNew Zealand. Due to the small scale of theprogram, it can neither be expected to haves ign i f i cant impact . However, f igures onparental satisfaction point towards a successof the voucher program. Overall 82% of theparents are satisfied with children’s educationwhile 97% of voucher student parents aresatisfied with their children’s education atindependent schools. In addition, the majorityof principals and teachers believe that thereforms had a posi t ive impact on pupi ls ’learning as well as on teaching content andteaching style (Hepburn 1999).

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10 . England and Wales (UK)

In the United Kingdom, the share of privateprimary enrolment was 4.9% in 2001 (EFA)and 2002 (EdStats). The figures for secondaryprivate enrolment in 2001 are 52.4% in 2001(EFA) and 58.3% in 2002 (EdStats). Privatehousehold expenditure in the UK amounts to13% of total expenditure on education in 2001(Education at a Glance 2004).

In England and Wales, an education voucherprogram was i n t roduced a s par t o f the“Education Reform Act” in 1988 in order toincrease the diversity of provision of educationand reduce state activity in this sector. Theprogram includes only public schools. 75% ofschool funding is al located based on age-weighted student numbers. Public schools arenot allowed to charge tuition, therefore publicfunding covers the full cost of education. Intheory there is free school choice, but inpractice there may be bureaucratic obstacles,which differ across districts depending on theLocal Education Authorities (LEAs). Schoolshave to follow a common national curriculumand national tests, but they have been givenmore autonomy over issues of managementand admin i s t ra t ion , such as the budget .Additionally, schools could choose to becomeindependen t g ran t -ma in ta ined s choo l srece iv ing funds d irect ly from the centra lgovernment instead of the LEAs; however, in1998 the LEAs regained influence and grant-maintained schools were again controlled bythe LEAs.

The voucher sy s tem has c rea ted somecompetition among public schools, but thiscompetit ion is l imited due to the ‘surplus

places rule’ stating that no new school canbe established as long as there are placesavailable in an existing near by school. Thevoucher program has had l i t t le effect oncompet i t i on be tween pub l i c and pr iva teschools, as private schools are not includedin the voucher scheme. This means that thereare some very good public schools, but therealso exist some, especial ly in low-incomeareas , t ha t o f fe r ve r y l ow qua l i t y o feducation. The latter hardly face an incentivefor improvement due to the surplus rulepreventing new public schools to emerge andthe absence of real competition by privateschools, as these are not inc luded in thevoucher scheme (Justesen 2002).

After the introduct ion of vouchers, somes tud ie s f i nd i n c reased so c io -e conomi csegregation among schools; however othersargue that segregat ion had taken p lacealready before, based on residential areas(Gauri and Vawda 2004).

Ac co rd ing to Gaur i and Vawda (2004) ,academic achievement improved since theintroduction of the school reforms. However,there are different opinions on whether thisis attributable to competition; the increasemight, for instance, be caused by the newlyintroduced practice of publishing results ofnationwide test and school inspection results(Gauri and Vawda 2004).

11 . USA

In the USA, private enrolment as a share oftotal enrolment in 2001 and 2002 was around10% for primary schools and around 9% forsecondar y s choo l s 30. P r iva te househo ld

30 For primary schools: 10.3% in 2001 (EFA) and 10.81% in 2002 (EdStats); for secondary schools: 8.8% in 2001 (EFA) and9.15% in 2002 (EdStats).


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investment in education as a percentage oftotal investment in educational institutionswas 18.8% in 2001 (Education at a Glance2004). School choice among public schoolsis restricted: Students receive free educationonly in the public school in their district; theycan attend a publ ic school in a differentdistrict but have to pay tuition there. Severald i f f e ren t voucher p rograms have beenimplemented in the USA a t the s ta te orcommunity level.

a . Charlotte, North Carol ina

In Charlotte, in the school year 1999/2000 avoucher program took place aimed at givinglow-income students the opportunity to attenda private school. It was privately funded bythe Children’s Scholarship Fund and voucherswere given to both primary and secondaryschool students. Vouchers with a value of upto $1,700 were awarded by lottery (Greene2002).

b . C leveland, Ohio

In Cleveland, vouchers f inanced by publicfunds are given to low-income students withinthe Cleveland City school district. Vouchersare allocated by lottery and can be used atboth publ ic and private schools (Hepburn1999; West 1997). The value of the vouchergiven to each student is based on the amountof tuition charged by the private school of hisor her choice; for families with an incomebelow 200% of the poverty line, 90% of tuitionis paid, for families with a higher income thevoucher covers 75% of tuit ion. The totalamount of tuition charged may not be higherthan $2 ,500 (Hanauer 2002) . Th i scorresponds to slightly more than 1/3 of percapita cost at public schools. Vouchers take

the form of checks payable to the parents of‘scholarship’ students.

The voucher program faced cons iderableopposition from teachers’ unions: A lawsuit bythe American Federat ion of Teachers andothers impeded the process of the lottery untiltwo weeks before the beginning of the schoolyear.

c . Dayton, Ohio

The voucher p rogram in Day ton i s a l sotargeted at low-income students. Voucherscan be used to attend publ ic and pr ivateprimary and secondary schools. In 1998/99vouchers were given to 765 students. Theprogram i s p r iva te ly funded by Paren t sAdvancing Choice in Education and since 1999also by the Children’s Scholarship Fund. Inthe first year, the vouchers covered 50% oftuition at private schools, up to a maximumof $1,200. Later the amount was increasedas more funds became available (Howell etal. 2000).

d . F lor ida

The object ive of the voucher program inFlor ida is to create an incent ive for low-performing public schools to improve theirquality of education. In order to achieve this,students attending a public school, which hasbeen classified as failing (i.e. as “F” on a scalefrom “A” to “F”) twice within a period of 4years based on student achievement tests, areoffered vouchers to attend a different publicor private school of their choice. Between1998 and 2003, 10 schools were labelled asfail ing, making their students el igible forvouchers. By subject ing these schools tocompetition of other public and private schools

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for students and the funding associated withthem, the voucher program generates anincent ive for the school to improve. Thevouchers are financed by public funding andamount to $4,000 per year(Gauri and Vawda2004; Greene and Winters 2003).

e . Mi lwaukee, Wiscons in

The introduction of the voucher program inMilwaukee was motivated by high drop-outrates, low test scores and high disparity ineducational opportunity between Milwaukee’sl ow- in come and midd le - in come fami l i e s(Hepburn 1999). To be eligible for vouchers,students must come from households with anmaximum income corresponding to 1.75 timesthe poverty l ine and they must not haveattended a private school or a school outsidethe Milwaukee Public School District the yearbefore (Witte and Torn 1994). The selectionof voucher recipients among el igible low-income applicants is done by the schools on arandom basis. Vouchers can be used at private,non-sectarian schools. They are given toprimary and secondary school students; mostrecipients are enrolled in pre-kindergarten tograde 8. The scope of the program is limitedto a maximum of 1 .5% of pub l i c s choo lstudents in the district, corresponding to 1,450students in 1994-95.

For each part ic ipating student, the schoolrece ives the same per cap i ta funding asMilwaukee public schools; schools are notallowed to charge voucher students additionaltuition fees (Witte and Torn 1997). The valueof the voucher increased gradual ly f rom$2,446 in 1990/91 to $4,696 in 1997/98(Molnar 1999) . There are a number ofrestrictions on schools that receive voucherfunds. They have to limit the share of voucher

students to 65% of their student body; in these l e c t i on o f s tuden t s , t hey may no tdiscriminate on the basis of race, religion,gender, p r i o r a ch ievement o r p r i o rbehav ioura l r e co rd s , i f c l a s se s a reoversubscribed, students must be selected atrandom. Schools must meet at least ones tandard se t fo r a t t endance , pa ren ta li nvo lvemen t , s tuden t a ch ievement onstandardised tests or grade progress and theymust be private and non-sectarian withoutreligious affiliation or training (Witte and Torn1997).

The voucher program led to the establishmentof one new private school and to the survivaland expansion of several others, which mightotherwise have had problems to remain open.The program has not had any influence onthe number of public schools in the area, asthe s cope of the program i s ver y smal lcompared to number of students in publicschools (Witte and Torn 1997).

f . New York City

The New York City voucher program took placeonce as a privately funded project initiatedby the School Choice Scholarship Foundation(SCSF). It was targeted at children from low-income families enrolled in kindergarten tograde 4 in New York Ci ty publ ic schools.1,300 scholarships were given out; each ofthem had a value of up to $1,400 per yearfor a period of three years. This fundingcovered tuition only partially (Howell et al.2000; Krueger and Zhu 2002).

g . Vermont

In Vermont, a voucher program is in place forstudents in towns without a public school or


23

without enough publ ic school capaci ty toac commodate a l l l o ca l s tuden t s . Theseprimary and secondary school students aregiven vouchers paid from public funds to payfor tuition at public or private schools. Thevoucher value varies with school type, i.e.,according to whether the student attendselementary school, middle school or highschool; it is about equal to government percapita spending in public schools. In 1998/99 vouchers were given to 6,505 students in90 towns and 83 private schools were part ofthe p rogram. P r i va te s choo l s mus t be‘approved’ to qualify for public funding. Thisimplies regulations concerning health andsafety measures, financial capacity, staffingand support services; furthermore, schoolsmust administer the ‘New Standards ReferenceExam’ to voucher students (Sternberg 2001).

A similar system exists in Maine. Also in thisstate, students in districts without a publicschool receive public funding to attend publicor private schools in other school districts(Heritage Foundation).

h . Wash ington, D.C .

The voucher program in Washington D.C. istargeted at students from low-income familieswho live in Washington D.C. and are enteringk indergar ten to grade 8 . Vouchers arepr i va te ly f i nanced by the Wash ing tonScholarship Fund and since 1999 also by theCh i ldren’ s Scho larsh ip Fund. Rec ip ient sselected by lottery31 are given vouchers, whichcover 60% of their tuition expenses up to alimit of $1,700. The students’ family incomehas to be at or below the poverty l ine toreceive this amount of funding; families with

an income above the poverty l ine receivesmaller scholarships, but students are noteligible if the family income is more than 2.5times the poverty line (Howell et al. 2000).


(i) Charlotte, North Carolina

After the program had been in placefor one year, voucher students had5.9% higher test scores in maths and6.5% higher scores in reading thanpub l i c s choo l s tuden t s . Th i s i sequivalent to saying that achievementincreased by 0.25 standard deviations.

The quality of teachers is higher inprivate schools and overall parentalsatisfaction with the school is higherfor voucher students than for publicschool students. Private schools offerless facilities than public schools, butnevertheless parents report h ighersa t i s fa c t i on w i th p r i va te s choo lfacilities than with the facilities offeredin public schools. The reason for thismay be that private schools focus onproviding those facilities that parentsvalue the most (Greene 2002).

(ii) Cleveland, Ohio

Also in Cleveland, voucher studentsand their parents are more satisfiedwith their schools than public schoolstudents. Concerning the impact of thevoucher p rogram on a cademi cachievement, the results are mixed.Controlling for prior achievement and

31 In the first year, 53% of the lottery winners used the vouchers.

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demographics, there was no significanteffect on third grade achievement afterone year, but a s ignif icant posit iveimpact could be seen in language andscience after two years. On the otherhand , s tuden t s i n new ly foundedprivate schools had significantly lowerachievement after 2 years than bothpublic and other private school students(Molnar 1999; Hepburn 1999).

(iii) Dayton, Ohio; New York City; Washington DC

The outcomes of these three voucherprograms , wh i ch are a l l p r i va te lyfunded and targeted at low-incomestudents, are similar. In none of them,a significant effect on test scores couldbe observed for non-African Americanstudents who used vouchers to switchto private schools. Based on aggregateda ta f rom a l l t h ree c i t i e s t akentoge the r, t he re i s a s i gn i f i can timprovement in tes t s cores in thesubgroup of African-American voucherstudents. Results are also reportedseparately for each of the three citiesand each of the two years studied.

In Dayton, only reading performancein the se cond year o f ana ly s i s i ssignificantly higher. In New York,there is a significant positive effect onmaths and reading scores for African-Americans in both years studied.

Fo r A f r i can -Amer i can s tuden t s i nWashington DC, a significant positiveeffect on maths and reading scores canbe seen in the second year. In the firstyear, the effect on maths scores is alsosignificantly positive. While there is asignificant negative effect on reading.The positive effect appears mainly foryounger students (grades 2-5)32. Thenegative effect is significant for olderstudents (grades 6-8)33.

The corresponding effects of beingoffered a voucher are about half thesize of the impact of switching to aprivate school; this can be explainedby the fact that only about 50% of thestudents who are offered a voucherac tua l l y sw i t ch to p r i va te s choo l .Concerning the statistical significance,the results for being offered a voucherare very similar to those for switchingto a private school in each of the cities(Howell et al. 2000).

Krueger and Zhu (2002) challengethe va l i d i t y o f t he se re su l t s .Reanalysing the data, they find thatthe pos i t ive effec t of vouchers onAfrican-American students disappearswhen the whole sample of African-Americans students is included insteadof on ly those s tuden t s fo r whombaseline scores are available34. Thed i f fe rence in te s t s co res be tween

32 The positive effect is significant at the 0.01 level for maths in both years and at the 0.05 level for reading in the secondyear; for older students it is only significant at the 0.1 level in maths in the second year.33 The negative effect is significant at the 0.01 level for older students in the first year.34 Most students did a baseline achievement test before the beginning of the program. However, all children in kindergartenand 11% of those initially in grades 1-4 did not take this test and were excluded form the earlier analysis. Including themleads to a 44% increase in sample size.


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African-Americans who were offered avoucher and those who a re no tbecomes statistically insignificant atthe 0 .05 l eve l when a l l A f r i can -American students are included in theanalysis. Furthermore, Krueger andZhu (2002) point out that the effecto f the voucher depends on thede f in i t i on o f A f r i can -Amer i can .Initially, a student was assigned to thegroup of Afr ican-Americans. I f themother was A f r i can -Amer i can .However, when those students with anAfrican-American father are included,the achievement effect of vouchersbecomes statistically insignificant.

(iv) Florida

In F lor ida, a l l schools that wereclassif ied as fai l ing improved theirperformance (Gauri and Vawda 2004).Greene and Winters (2003) categoriseschools into 5 groups based on thedegree o f th rea t f rom vouchercompetition each school encounters.Analysing these categories in terms oftest scores, they conclude that low-performing schools improved directlyproportional to the probability of beingeligible for vouchers, which means thatthose schools whose students werealready receiving vouchers progressedthe most (Greene and Winters 2003).

(v) Milwaukee, Wisconsin

I n the i r a s se s smen t o f t heMilwaukee voucher program four yearsafter its introduction, Witte and Torn(1994) find the academic achievementof voucher students to be about equalto the achievement of public school

s tuden t s . They run a regre s s i onanalysis controlling for several factorssuch as gender, race, income, gradeand prior achievement and arrived atdifferences in contradictory directionsbetween voucher students and publics choo l s tuden t s , mos t o f t hemstatistically insignificant. When theyintroduced the number of years duringwhich voucher students had been inprivate school as an additional controlvariable, some coefficients changeds igns and the re su l t s were no ts ta t i s t i ca l ly s ign i f i can t . The on lydifferences in favour of the programare s l i gh t l y h igher a t t endance o fvoucher students and high parentalsatisfaction with the private schoolsand the program as wel l as higherparen ta l i nvo lvement i n s choo lactivities.

In contradic t ion to these f indings,Greene et al. (1997), after analysingthe same time period, report significanteffects of the voucher program onacademic achievement for studentshaving been in the program for threeand four years. The authors estimatethe impact of vouchers after 1, 2, 3and 4 years based on the Iowa test ofbasic skills. Controlling for gender andsevera l o the r fa c to r s , t hey f i ndstatistically significant differences intes t s cores between publ i c s choolss tudents who had lost the voucherlo t t e r y and s tuden t s hav ing u sedvouchers at private schools for threeand four years. As quoted by Gauriand Vawda (2004) as well as by Molnar(1999), Rouse (1997) finds this effect

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Factors that enhance the impact of vouchers on quality of education

on ly fo r mathemat i c s s co re s 35.Controlling for estimated ability andfamily characteristics, she does not finda s igni f i cant d i f ference in reading

More CompetitionPolitical Viability of

the ProgramCompetition Focused on

Quality

Publishing schoolevaluations/ external

exams

Includemany

schools

Higher voucher value for poorstudents or targeting of vouchers to

low-income families

Limited but preciseregulation of schools

V. FACTORS INFLUENCING SUCCESS ANDFAILURE OF VOUCHER PROGRAMS

Factors that limit the impact of vouchers on quality of education

Less Competition

35 See Molnar (1999) for an in depth comparison of the studies by Witte and Torn (1994), Greene et al. (1997) and Rouse(1997).

scores between voucher students and publicschool s tudents . In mathematics , Rouserepor t s s i gn i f i can t l y h igher s co re s fo rvoucher students after three and four years(Molnar 1999).

Surplus places rule(entry barriers)

Lack of privateschools in certain

areas

Unequal funding ofpublic and private

schools

Low participation rateof private schools


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c . Low partic ipation rate of privateschools in the voucher program

Provided a voucher system includes privateschools (i.e. either vouchers can only be usedat private schools or they apply to both publicand private institutions), competition shouldcreate pressure on public schools to improvetheir quality. This, together with a highershare of enro lment in potent ia l ly bet terpr ivate schools , should ra i se the overa l lquality of education in the system.

However, this mechanism may not work if alarge share of private schools choose not toaccept education vouchers. In this case, thenumber of effective competitors is limited.Fu r the rmore , t hose s choo l s t ha t do no tparticipate in the voucher program are usuallythe best private schools, as can be seen incountries like Colombia and Chile. This meansthat not only the quantity but also the qualityof competing schools is lower, providing lessincentive for good performance for schoolswithin the voucher system.

d . Lack of private schools in certainareas

Competition based on enrolment presumes thatthe re a re su f f i c i en t number o f s choo l savailable within an acceptable distance to givestudents a real choice. This assumption canbe met either by the existence of differentschools from the beginning or by new (usuallyprivate) schools created after the introductionof vouchers. In rural areas in Chile there arehard ly any p r i va te s choo l s . Even theintroduction of the voucher scheme did notapparently create enough incentives for newschools to be established. Accordingly, these

36 Formally, the amount of voucher funding is equal for public and private schools, but public schools are given additionalsubsidies.

A. Factors that limit the impact ofvouchers on quality of education

a . ‘Surplus P laces Rule’Vouchers are intended to improve schoolqua l i t y by c rea t ing a compe t i t i veenvironment. This competition is limited ifthere i s a ru le in p lace wh i ch proh ib i t sfounding a new school as long as there arefree places in an existing school in the area,such as in England and New Zealand. In thesetwo countries the ‘surplus places rule’ appliesto public schools. While there is free schoolchoice among public schools, no or only fewvouchers exist to attend private schools. Thiscombination implies little competitive pressureon low-performing public schools and hencelittle incentive for them to improve. Suchentry barriers limit the improvement potential.

b . Unequal funding of publ ic andpr ivate schools

In his analysis of the Chilean voucher system,Sapelli (2005) points out that competition isrestricted due to the design of the voucherprogram. First, private schools face a highdegree o f government regu la t i on andeffect ively less per capita funding 36 thangovernment schools, which prevents themfrom responding to consumer demand aseffectively as they ideally could.

Second, public schools do not only receiveadditional funding, but also badly performingschools are partly compensated for the lossesdue to leaving students, to enable them topay their teacher salaries. This underminesthe incentives for improvement inherent inthe voucher system.

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areas have not benefited from the vouchersdue to a lack of school choice available inpract ice. The lack of private schools andtherefore the lack of competition in rural areascan also be regarded as a reason why theChilean voucher scheme has not resulted in abetter quality of education in the country asa whole. Despite the existence of a positiveeffec t of compet i t ion in some areas, thenumber of d i s t r i c t s in which compet i t ionactually takes place may be too small to affectoverall measures of achievement.

B. Factors that enhance the impact ofvouchers on quality of education

a . Publ i sh ing School Evaluat ions/External Exams

Evaluations of the performance of individuals choo l s based on a ch ievement by thegovernment or by another independent agencymay create incentives to offer better qualityof teaching. In England and in Florida, it hasbeen observed that the practice of publishingschool evaluat ions has contr ibuted to theimprovement o f the overa l l qua l i t y o feducation. Publicly accessible evaluations cancomplement voucher schemes; either as adirect criterion of eligibility for vouchers asin Florida or by providing better informationabout school quality to parents, enabling themto make an informed choice. Potentially, thismight also counteract the tendency towardslow-quality private voucher schools that hasbeen observed in Colombia and Cleveland,Ohio.

The beneficial effect of external evaluationof school performance is also supported byWoessmann (2005). In his comparison ofinternational standardised test scores acrossmore than 30 countries, he finds a positiveeffect of external exit exams on academicachievement; ‘external’ in this context refersto exams des igned by i ndependen tinstitutions, which can be either public orprivate37.

b . Limited but Precise Regulat ion ofS choo l s

In order to ensure the independence of privates choo l s i n the l ong run a s we l l a s t hec red ib i l i t y o f t he voucher sy s t em, i t i sne ce s sa r y to impose few bu t p re c i serequirements on schools that receive voucherfunding. This insight is brought forward bySandstroem (2005) based on the Swedishexperience. According to him, compliancewith these rules, such as quality standards orrequ i rements on the cur r i cu lum such askeeping religion and science separate, shouldbe strictly enforced by the government. InSweden this was initially not the case, whichmade opponents of the voucher program askfor stricter regulation of private schools andexclusion of confessional schools, as nationalachievement targets had not been met andsome re l ig ious s choo l s were ac cused o fviolating the requirement of non-confessionalteaching 38.

The Netherlands provide an example of a well-functioning voucher system that has a certainnumber o f de ta i l ed requ i remen t s on

37 An interesting aspect of his findings is an interaction effect between school autonomy and external exams. Withoutcentral exams, school autonomy over teacher salaries has a negative effect on achievement. However, in the presence ofcentral exams this effect is turned around and autonomy over teacher salaries improves achievement.38 In response to this, the Swedish authorities defined ‘non-confessional ’ teaching more clearly; they did not ban religiousinstruction in schools but required to keep it apart from teaching other subjects.


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participating schools. Despite the regulations,the sys tem a l lows for great d ivers i ty ofschools.

c . Higher Voucher Value for PoorStudents or Restr ic t VoucherProgram to Low-Income Students

Under a voucher system, schools appear tohave an incentive to preferably select studentsfrom a high socio-economic background, inorder to derive a competitive advantage fromthe social composition of their student body,wh i ch o f t en p lays an impor tan t ro l e i nstudents’ and parents’ choice of a school.Evidence for this can be seen in Chile and NewZealand. Accordingly, competition is to somedegree based on socio-economic status ratherthan the qua l i t y o f educa t i on . Th i sphenomenon dec rease s the bene f i t s o fvouchers for two reasons, one, because itdiverts school administrators’ attention fromimprov ing the qual i ty of educat ion, andsecond , be cause the ex t reme so c ia ls t rat i f i cat ion across schools may lead toserious political problems, as the example ofNew Zealand shows.

To prevent this, Gauri and Vawda (2004)propose to link the value of the voucher toso c io -e conomi c background , i fadministratively possible, and pay a higheramount for enrolling disadvantaged students,as it is done in the Netherlands. In countrieswhere th i s p ra c t i c e i s no t f ea s ib l e , i nparticular in many developing countries, Gauriand Vawda (2004) recommend restrictrictingthe voucher program to students from low-income families.

d . Include as Many Publ ic and PrivateSchools as Poss ib le

The degree of competition among schools willbe higher the more the number of schools thatparticipate. If a good number of high qualityprivate schools are included, it raises the levelat which schools compete. Successful voucherprograms for instance in the Netherlands orin Sweden include most of these countries’schools, both public and private. On the otherhand, less favourable outcomes have beenobserved in voucher systems restr icted topublic schools, as in England39, or in countrieswhere a cons iderab le number of pr ivateschools has chosen not to participate in theprogram, as in Chile or Colombia.

VI. CONCLUSION

Desp i t e va r i ed ou t comes o f voucherexperiments around the world, there hasrarely been a case where the vouchers havelowered the l ea rn ing a ch ievement s o fs tuden t s , even when they m igh t havecontr ibuted to s ign i f i cant improvements .Vouchers’ success in improving the quality ofeducation in the country or area where theyare implemented seem to depend crucially onthe particular features of the voucher schemeand on the general conditions of the educationsystem.

Several factors should be kept in mind whendesigning a voucher scheme. First, as manypublic and private schools as possible shouldbe included into the voucher system to ensurea high degree of competition and a high levelof quality at which competition takes place.

39 Overall achievement in England improved, but there are poorly performing public schools that do not have any incentivefor improvement, as in New Zealand.

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Second, information available to students aswell as incentives to schools will be improvedfur the r by pub l i sh ing ex te rna l s choo levaluations. Third, a way to direct the focusof competition to the quality of education (andaway from attracting students from high socialstrata) is to assign a higher voucher value tos tuden t s f rom a l ower so c io -e conomi cbackground or, alternatively, to give vouchersexclusively to this group of students. Fourth,l im i t ed bu t c l ea r and s t r i c t l y en fo r cedrequirements on part ic ipat ing schools areimportant to guarantee the political viabilityof the program. Such concise rules ensuresome public control of how tax-money is spentand avoid the presence of single schools withlow quality or radical ideology, which couldundermine the credibility of the whole system.On the other hand, a number of obstacles tocompetition have been observed, which lowerincent ives for providing high qual i ty andthereby prevent the system from developingits full potential. One hindrance is posed byentry restrictions in the educational market.For example, the ‘surplus places rule’ whichprohibits the establishment of a new school ifthere are free places in exist ing schools .Second, unequal funding of public and privateschools distorts competit ion. Third, a lowpar t i c ipa t ion ra te o f p r i va te s choo l s , i nparticular of top-quality private schools, willlower the level of quality at which schools inthe system compete and reduce incentives forimprovement. Fourth, a lack of private schoolsi n spe c i f i c a reas , fo r i n s tance i n thecountryside, may exclude these areas from thebenef i t s o f t he voucher sy s tem, a s theexistence of education vouchers may not be astrong enough incentive to guarantee creationof new private schools in these regions.

VII . FREQUENTLY ASKED QUESTIONS

√ What if parents misuse thevoucher?

No human system designed to givea f ree bene f i t can be comp le te l yimmuned from abuse. The issue really iswhich system is less prone to misuse, andwhere even the misuse leads to somebenef i t s f o r t he ta rge t popu la t i on .Education vouchers make the transfer ofgovernment funds t ransparen t andaccountable. The education voucher canon ly be u sed fo r the purpose o feduca t i on . The s choo l co l l e c t s t hevouchers from students, deposits them inthe school bank account, the bank thendebits the government’s account for theamoun t o f money spec i f i ed i n thevoucher. No money changes hands at anylevel. The transfer of money is throughthe bank and therefore easily traceablein case of a dispute.

Importantly, poor parents well under-stand that education is their children’sticket out of poverty. Today they alreadysend their children to private schoolsdespite having free government schoolsnearby. Education vouchers would onlyempower them more in choosing a betterschool.

√ Will government school teachers losetheir jobs?

Long queues and high donationscharged by p r i va te s choo l s c l ea r l yindicate one fact: There is a shortage ofgood schools everywhere in the country.


31

The supply of schools is not sufficient tomeet the existing demand. Educationvouchers increase th i s demand evenfurther and widen the supply-demandgap. Instead of schools closing down orteachers losing jobs, more schools wouldhave to be opened and more teacherswould need to be h i red to meet theincreasing demand for better quality.Teaching is a labour intensive service andbetter service would require more andbetter teachers.

Moreover, in today’s system, just likeparents and students, the governmentschool teachers are also not a happy lot.Empir ical surveys show that averagesalaries in government schools are oftenmore than seven times higher than in theunrecognised private schools. In spite ofthat, teachers in private unaided schools,including unrecognised ones, were noless sat i s f ied than the ir governmentcounterparts with salaries, holidays ortheir social standing in the community.On all other issues, including the workingenvironment, school infrastructure andleadership of the head teacher or schoolmanager, teachers in government schoolsexpressed greater dissatisfaction thantheir private school counterparts. Foreducat ion vouchers to del iver bet terquality education, government schoolsand teachers would also have be givenfar more autonomy and independence.Vouchers create an environment whereteachers themselves get more involvedand provide better learning outcomes.Vouchers change the system not only forstudents but also for teachers.

Among the countries that have implem-ented a voucher program, only Chile hadchanged the terms of teacher contracts,which it had re-changed after some time.In none o f the voucher coun t r i e s ,teachers were f i red or the i r ser v i cecontracts changed.

√ Do educa t i on vouche r s shu tgovernment schools?

Th i s ques t i on i s s im i l a r t o theprevious one about government schoolt ea cher s l o s ing the i r j ob s due tovouchers. Just remember one single fact:We need more schools and more teachers,not less! Yes, schools would have tochange the way they think about anddeliver education; they would have tolearn how to individualise teaching andhow to identity and meet special needsof the wide diversity of students. But wewould never need fewer than the schoolsthat exist today.

The recent changes in the telecom, air-l i ne , and bank ing se r v i ce s a re a l soinstructive in understanding the issue ofgovernment schools. The governmenttelephone company, airline and banks arestill there; they have not be privatisedor closed down. We simply took awaytheir monopoly and opened up the areasfor entry for private players, and ensuredthat they compete under the same rules.The re su l t s have been a s tound ing .Educat ion vouchers s imi lar ly removegovernment’s monopoly on the educationof the poor. They also empower the poorto exercise a choice of their school.

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√ What about schemes like the middaymeal?

Compe t i t i on fo s te r s i nnova t i on ,invent iveness , and cus tomer spec i f i cservices. To attract and retain vouchers tuden t s , s choo l s wou ld have tounderstand their specific needs and trytheir best to meet them. These needswould vary from family to family andplace to place; no one set of serviceswould satisfy all students and parents. Invery poor neighbourhoods, schools wouldtry to attract students by offering freemeals, textbooks, uniforms, and may betransport. In not-so-poor areas, extra-curricular activities, more emphasis onarts, music, or sports, or even after schoolday care would better meeting the needs.We can be fa i r l y ce r ta in tha t w i thvouchers the increasing parental choiceand competition among schools.

To i l l u s t ra te the pos i t i ve s o f su chcompetition, The Orchids Public School,located on the outskirts of Gomti Nagarin Lucknow has launched the midday mealscheme for its 200-odd students fromNursery to Class VIII. Since the schoolgenerally caters to students from middleto lower middle classes, the managementhopes to draw parents by offering bettereducation than government schools alongwith a free meal. To quote a parent, ‘‘thegovernment schools are free, but ourchildren are unable to learn anything.Either, teachers are absent or, they arein a hurry. Now, if private schools givef ree m idday mea l s wh i l e charg ingmarginal fees, we do not mind sending

our children to these schools rather thanto government schools,’’ (Indian Express,Lucknow, February 15, 2006)

√ Why would private schools want tobe a part of the voucher program?

Contrary to popular belief, althougheducat ion of the poor has been theresponsibi l i ty of the state, there aremany p r i va te unre cogn i sed s choo l so f fer ing educa t ion to the poor. Forexample, a survey of the slum areas ofNorth Shahdara in Delhi showed that ofthe total 265 schools in the area, 71schools were government, 19 schoolswere private aided and the remaining175 were private unaided schools. Of thelargest majority, the private unaidedschools, 102 were recognised and 73unrecogn i sed . The re a re moreunrecognised private unaided schoolsthan there are government schools inthese poor areas.

With the voucher money, these schoolswould be able to improve infrastructure,offer more extra-curricular choices, andraise their standards overall. The poorwould get even better education. Theschools would be more open to meetother needs of students and parents thatthey cannot fulfil today. It is likely thatthe elite private schools may choose notto participate in the voucher program.Though there would be a few which wouldprefer to participate for various social,political and economic reasons. Even ifnone of them did, the poor would stillhave far better choices among those whodo partic ipate, than they would havewithout a voucher program.


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√ What if voucher students are lookeddown upon?

First, the voucher student is as mucha paying customer as any other studentin the school. Money has no colour! Oncethe student is in the school, there is noreason for the school to treat a vouchers tuden t any d i f f e ren t l y than o the rstudents. It is possible that some schoolsdecide not to participate in the voucherprogram and thereby do not take anyvoucher students. One solut ion is toforce them by law to participate in theprogram and take voucher s tudents .Such compulsion is unlikely to result ingreat common good. If there are 200voucher s tuden t s i n a poorneighbourhood, they may not be able togo to an elite private schools 5 km away,

if that school does not participate in theprogram. But, they may find that thes choo l one km away has sudden lyupgraded its infrastructure, hired moreteacher s , improved i t s l i b ra r y andlaboratory, and they would be far morecomfor tab le go ing to tha t new lyrefurbished school.

Let’s be clear, vouchers do not guaranteea poor child a seat in the Doon School.The Doon School has limited capacity, noteveryone who is willing to pay the feescan get admission. The poor child herselfmay be better off going to a school thatis l ike Doon in education qual i ty butwithout the same classmates. Voucherswould create more schools that providebetter and better quality education andwhere the poor would be wholeheartedlywelcomed.

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VI I I . REFERENCES

Aggarwal, Y. 2000. Public and Private Partnership in Primary Education in India: A Study ofUnrecognised Schools in Haryana. New Delhi: NIEPA.

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Howell, W.G. et al. 2000. Test-Score Effects of School Vouchers in Dayton, Ohio, New York City, andWashington, D.C.: Evidence from Randomized Field Trials.http://www.educationnext.org/unabridged/20012/howell.html.

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Education Vouchers: Global Experience and India’s Promise

Table of Contents

I . Convent ional Reforms

I I . New Agenda for Reforms

I I I . Educat ion Vouchers: Fund Students , Not Schools

1 Equal opportunity to rich and the poor2 What are the benefits of education vouchers?3 Where have vouchers been implemented?4 Types of vouchers

I V. Global Experiments in Educat ion Vouchers

1. Sweden2. Czech Republic3. Italy4. Colombia5. Chile6. Cote d’Ivoire7. Denmark8. The Netherlands9. New Zealand

10. England and Wales (UK)11. USA

V. Factors Inf luencing Success and Fai lure of Voucher Programs

1. Factors that limit the impact of vouchers on quality of education2. Factors that enhance the impact of vouchers on quality of education

V I . Conc lus ion

V I I . Frequent ly Asked Quest ions

V I I I . References

1

2

4

6

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