The effectiveness of private school franchises in Chile’s national voucher program

There is persistent debate over the role of scale of operations in education. Some argue that school franchises offer educational services more effectively than small independent schools. Skeptics counter that large centralized operations create hard-to-manage bureaucracies and foster diseconomies of scale and that small schools are more effective at promoting higher quality education. We can gain insight into this debate by examining Chile’s national voucher program. This paper uses 4th-grade data to compare achievement in private franchises, private independent, and public schools in Chile. Our findings suggest that franchises have a large advantage over independent schools, once student and peer attributes and selectivity are controlled for. We also find that further disaggregating school franchises widens the larger franchise advantage. We conclude that policies oriented to create incentives for private school owners to join or start up a franchise may have the potential for improving educational outcomes.