Abstract:

The educational reform which Chile introduced in the early 1980s featured the introduction of vouchers which were meant to create competition and large scale decentralization. The voucher system affects over 90% of students yet has shown, as elsewhere, inconclusive results. The lack of consistent evidence suggesting that competition improved educational performance, and the relatively small effects found in most part of the literature could be explained by the existence of the switching costs parents face. Switching costs have been analyzed in a context of industrial organization and strategy studies, where the concern is how these costs affect competition and increase profits and hence, how firms affect customer fidelity.

In the case of education, for competition to have an impact on efficiency, parents must first have the ability to choose among schools, ability that can be hindered by lack of information or the existence of switching costs. Switching costs are presumably more relevant in education than in other areas. One factor which may reduce this choice is switching costs, caused by factors such as the stress that children experience and the loss of social networks. We develop a methodology which quantifies the switching costs and then, we analyze the existence of these costs in Chile. Despite the importance of understanding switching costs in a voucher context, to our knowledge there is no study that measures their importance and its impact. In this paper we define a methodology to measure switching costs and we applied it to the case of education in Chile. Using flexible estimation techniques, that consider the existence of structural changes in the probability to change school, we found that switching costs are statistically significant and economically relevant.

Keywords:

Academic performance, school choice, switching costs.