Working Paper: Chile Moves on from Friedman

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Working Paper: How Chile Modified Friedman

By Adrián Zancajo
Working Paper No. 239
National Center for the Study of Privatization in Education

No country implemented Milton Friedman’s vision for vouchers as faithfully as Chile. In keeping with Friedman’s initial argument for vouchers in 1955 in his essay “The Role of Government in Education,” Chile rolled out a voucher system in 1981 grounded in the belief that competition between schools for government funding would lead to greater efficiency and better academic outcomes.

With Friedman’s case as their blueprint, Chilean education officials authorized a universal scheme of vouchers redeemable at public and private schools (religious as well as nonsectarian), granted schools autonomy over admissions, urged entrepreneurs to open proprietary schools, and let the market determine teacher salaries in order for schools to get the best teachers they could hire. While Chilean officials surrendered this last feature of Friedman’s recommendations in 1990 by reinstating uniform salary schedules, based on seniority and credentials, they three years later introduced Friedman’s prescription allowing schools to charge more than the value of the voucher, in turn, requiring parents to make up the difference.

With these reforms, attendance at private schools surged. In 1980, the year before the introduction of vouchers in Chile, 78 percent of students in primary and secondary schools attended state schools; 15 percent attended private schools supported with marginal funding from the government; and 7 percent attended elite private schools receiving no government subsidies. By 2006, the breakdown was 51 percent, 43 percent, and 6 percent, respectively.

Yet with this surge in privatization came growing socioeconomic segregation among schools and increasing inequality in student achievement. The government responded in 2008 with its Preferential Subsidy Law, boosting the value of vouchers by 50 percent for students coming from families in the bottom four income deciles. In 2014, the government took three more steps away from Friedman, pledging in its Inclusion Law to require that all schools accepting vouchers rescind top-up fees, give up control over admissions, and cease operating as for-profit entities.

In “Drivers and Hurdles to Regulation of Education Markets: The Political Economy of Chilean Reform,” Adrián Zancajo explores the process involved in this striking reversal of policy. Through examination of 30 key policy documents and interviews with 37 stakeholders involved in this transformation, Zancajo, a postdoctoral fellow at the University of Glasgow, reveals a telling story about the forces in Chile for and against modification of the country’s market-based system of schooling. In doing so, Zancajo also brings into focus the backdrop to the country’s current political crisis.

Samuel E. Abrams
Director, NCSPE
December 10, 2019

Published Tuesday, Dec. 10, 2019