School Choice Through the Private Sector: A Chilean Method of Education Reform

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Globally, market-based school choice systems are one of the more current education reform movements. Choice systems are generally developed to use the competitive market theory to improve educational quality for struggling school districts while driving down costs. They place more control over decisions in education into the hands of private citizens in the effort to democratize education and improve outcomes through market competition. Chile has a robust, and growing system of market-based school choice systems which has thrust the country into the international spotlight (Winkler 203). Education policy and administration in Chile has undergone drastic changes since the early 1980’s. Through this research I seek to answer how public policies on education changed in Chile from the 1980’s to present day, and how have these changes impacted the public and private school enrollments. In addition, how has public opinion about decentralization and privatization shifted as these policies have unfolded?

I argue that the shift in Chilean education policies, beginning in the 1980’s, have caused the private sector to grow substantially through voucher based government funding. This has resulted in a significant increase in the number of students attending private sector schools, and a subsequent decrease in public sector enrollments. Public perceptions of this educational reform, which were once favorable during the initial decades, have now shifted to increasingly critical of a system which has created further socio-economic stratification.

At the end of the 1970’s Chile was coming out from under deep economic hardship, and the government moved to a system of decentralization and privatization for many of its social and welfare services. Education is one of the major institutions which experienced significant restructuring during the time of the military regime, headed by General Pinochet (Gauri 1). The first major shift toward decentralization and privatization in Chilean education policy encouraged the movement of students out of the public sector and into the private with the Law of Municipal Revenues of 1979. This law transferred oversight and implementation of schooling to local communities, with the idea that local municipalities are better suited to make decisions about the educational needs of their children (Gauri 23). A series of laws and enactments followed which created a system of equal funding per pupil regardless of the type of educational institution the child was enrolled in. Through a government voucher called subvention, parents could enroll their child in any public or private institution, and that school would receive government funding for each child based on per pupil enrollment (Gauri 2). This voucher system opened the flood gate for private schools to expand enrollments now that all students had the ability to pay for their education regardless of family income.

This new funding policy, which created a whole new education market, encouraged the development of a new network of for-profit, private schools which began developing in the early 1980’s. A decade  after the initial policy changes which led to this new, publicly funded, private marketplace, 1,000 new tuition-free, private schools sprang up to fill the demand (Elacqua 447). This increase in private school access made it difficult for municipal schools to maintain student enrollments and remain economically viable (Guari 2). These policies transferred education decisions into the hands of individuals and democratized schooling through free market practices.

There were substantial changes to student enrollments immediately following the new funding structure. Economist Varun Gauri wrote a book in the 1990’s documenting the history of policy changes and their effects in Chile. According to Gauri,  in the early 80’s approximately 75% of students were enrolled in traditionally structured, public schools which received government funding and oversight. By the mid 90’s, only 58% of the student population were enrolled in these public institutions. The cause for this substantial decrease in public school enrollments were that by 1996, about 35% of students were enrolled in private institutions which were “essentially tuition-free” due to public subsidies which allowed for families to enroll their children in private institutions which had limited or no government oversight (Gauri 2). Gauri documents that at this time, “…many Chileans believe passionately in the education reforms, arguing that they are effective, fair, and fundamentally moral” (3). Public opinion around these policies were favorable as more people were gaining access to new educational opportunities for their children. This was likely and exciting time for the Chilean middle class as private education, once reserved for the most privileged, was now considered to be open to all.  

During this period, research about Chile’s school choice system was also favorable and found that nationally, “…several measures of the performance of the Chilean educational system seem to have improved.” Among the documented positive outcomes were higher rates of educational attainment and lower drop-out rates (Gauri 2). During these earlier stages of implementation many researchers considered the choice system in Chile as a democratic and effective method for improving the educational experiences of all Chilean students regardless of income and social class. Private education was seen as more effective than the municipally run school districts at improving educational outcomes of students, and the belief that through this free market, municipal schools would be required to improve through competition. The graph below shows that the greatest changes in enrollments occurred immediately following the new funding policies of the early 1980’s.

Source: Elacqua. "The Impact of School Choice and Public Policy on Segregation: Evidence from Chile." (2012).
Source: Elacqua. “The Impact of School Choice and Public Policy on Segregation: Evidence from Chile.” (2012).

New research began to call into question the consequences of the voucher system which resulted in children with different socioeconomic characteristics  attending different types of schools. According to researcher, Gregory Elacqua, who has been actively researching the effects of school choice in Chile, “…most evidence suggests that unrestricted choice in Chile has exacerbated stratification between public and private schools” (444). The development of this body of research has provided the basis for growing concerns about the equity of the Chilean model of administering education. These findings may have been surprising to the international community, the Chilean government, and the Chilean people because this system was believed to provide more equitable opportunities to the children of Chile. While more children now had access to private education, who would not have otherwise, those experiencing the greatest levels of poverty in the country were receiving an education in much more isolated settings of concentrated poverty as a result.

As the graph below illustrates, by 2007, municipal schools were serving a disproportionate share of low and low-middle income students. By contrast, subsidized private schools that received per pupil voucher funding from the government, were serving a predominantly middle income and middle-high income population.

Source: Murnane. "Distribution of Student Achievement in Chile Baseline Analysis for the Evaluation of the Subvencion Escolar Preferential, SEP (Preferential School Subsidy)." (2010).
Source: Murnane. “Distribution of Student Achievement in Chile Baseline Analysis for the Evaluation of the Subvencion Escolar Preferential, SEP (Preferential School Subsidy).” (2010).

While it was difficult to identify the absolute causes of this economic segregation of Chilean students, there were documented procedures and policies in private schools which were considered to contribute heavily. In a 2010 World Bank report, the unregulated flexibility for private schools to filter in higher socioeconomic status groups could be attributed to their ability to “…accept, reject, and dismiss students as well as to establish their own selection processes” (Murnane et al.  6). The unregulated nature of these private institutions allowed them to control the population they were serving in a way that municipal schools could not, leading to further stratification between economic and social classes. The decentralization and privatization policies of of the 1980’s to the 2000’s led to a dual system of schooling: Highly regulated public schools were serving the country’s poorest citizens and faced the greatest challenges associated with poverty, in providing an equitable education. The non-profit and for-profit private schools had much more flexibility to cultivate a population of students with more desirable socioeconomic qualities who required fewer resources to succeed.  

These major shifts in the policies of education implementation and funding have not existed without criticism and public push back. As new research emerged about the consequences of unregulated privatization, a series of massive student protests brought these concerns into the public sphere as well. In 2006, a major, nationally organized demonstration of more than 600,000 students took place across the country of Chile. This unified student protest, dubbed the Penguin’s Revolution, was the youthful reaction to what many believed to be an inherently unfair education system. Entire schools were paralyzed across the country as students boycotted classes and engaged in public displays of outward defiance. (Cabalin 219) This first major protest was the beginning of a multi year movement which the public was calling into question whether a system originally intended to promote equity, was in fact producing more inequality and stratification.

Students protest by dragging their desks into the school quad during the 2006 “Penguin Revolution.” (Photo by antitezo.) Center for Latin American Studies. U.C. Berkeley (2015)
Students protest by dragging their desks into the school quad during the 2006 “Penguin Revolution.” (Photo by antitezo.) Center for Latin American Studies. U.C. Berkeley (2015)

Following the early exhibitions of public pressures on the government to offer more equitable education in 2006, the Chilean Legislature and political actors began changing their opinions on the future of education in their country. Patrick McEwan, an economics professor spent the 2000’s conducting research on the effects of voucher systems and school choice on socioeconomic stratification. He documented that, “In 2006, student protests resulted in renewed government commitments to address education quality. Additionally, there was surprising agreement among candidates in the last presidential election that education policy should address high levels of inequality” (McEwan et al. 2). The demands of protesters and subsequent public pressure did not fall on deaf ears, and politicians began to look closely at ways to mitigate the effects of the government policies during the previous decades.

In 2008, the Ley de Subvencion Preferencial (SEP) Law was enacted and developed a new funding structure for education. This funding structure adjusted the subvention amount so students with low socioeconomic status would receive supplemental funding, to adjust for the higher needs of those student populations. This additional subsidy added 50% to the base voucher amount and was intended to help schools which served high needs community more effectively (Elacqua 451). This law was enacted in the effort to offset the harmful effects of segregated education which was believed to be exacerbated by the initial flat-rate per pupil subvention expenditure. According to Elacqua, in response to findings that private schools were responsible for some of this socioeconomic segregation, the new law “forbids participating schools from using parental interviews and admissions tests to select and expel students. In addition, participating schools cannot charge tuition to priority students.”  The law also increased accountability to all schools which required them to prove their effectiveness and created limitations to private schools to filter out the most disadvantaged students (Elacqua 451). This change in public policy did not abandon the idea of market competition to provide more equitable funding. But now there was a desire for more government oversight in the effort to make equitable opportunities a reality, rather than leave the system vulnerable to the free market mechanisms, which bent to business and individual motivations for economic advantage.

Despite changes to the per pupil funding structure in Chile, which was intended to balance inequities within the system, a second wave of student unrest erupted from 2011 to 2013. The demands of these protests were also focused on equity, but now called for the end to the outsourcing of education to private institutions. Among the demands, students called for that the government withdraw funding from for-profit, educational institutions, which they argued placed profits above the needs of socio-economically disadvantaged students (Elacqua 446). This shift in the demands of the students signified a movement to change the educational funding structure entirely, rather than a restructuring of the current system.

“Education Is Not For Sale” Movilización estudiantil de 2011 en Chile: marcha del 30 de junio de 2011.
“Education Is Not For Sale” Movilización estudiantil de 2011 en Chile: marcha del 30 de junio de 2011.
“Up to 120,000 defy winter rains and violent confrontations in Santiago as Chile’s students regain momentum” (Quiltro)
“Up to 120,000 defy winter rains and violent confrontations in Santiago as Chile’s students regain momentum” (Quiltro)

Over 35 years after the initial decentralization of schooling in Chile, the country has followed the path to unregulated privatization to privatization with increased government oversight. The most current research argues that this voucher system has lead to further economic stratification within the country, and the concentration of populations living in poverty into municipal schools. There is also new research that calls into question whether private schooling is even effective at increasing student achievement. Much of the research argues that the “peer effect” has a greater consequence on individual achievement rather than the type of school a student attends (Somers et al 69). While the overall academic benefits of school privatization appear to be neutral, there is a belief that it has been a cost effective way to educate the population due to cost cutting measures that municipal schools are not able to employ such as limiting teacher pay and collective bargaining powers (World Bank 7). Privatization policies have made it difficult for municipally run schools to compete with their less regulated, private market competition.

With this latest research, the heated debate over the course of government involvement in the education of private citizens is not likely to cool down. Relative to the country as a whole, those with political and economic power have an incentive to maintain the current system which increases stratification. This is because they have benefited the most from it. Time will tell how the Chilean government and its citizens will continue navigate and negotiate these issues around education. What is understood through the study of the last 35 years is that the public will demand a say in the future policies which will affect students for generations to come.


Cabalin, Cristian. “Neoliberal Education and Student Movements in Chile: Inequalities and Malaise.” Policy Futures in Education 10.2 (2012): 219. Sage Journals. Web. 4 May 2016.

Elacqua, Gregory. “The Impact of School Choice and Public Policy on Segregation: Evidence from Chile.” International Journal of Educational Development 32, no. 3 (2012): 444-53. Accessed April 20, 2016. doi:10.1016/j.ijedudev.2011.08.003.

Gauri, Varun. School Choice in Chile: Two Decades of Educational Reform. Pittsburgh, PA: U of Pittsburgh, 1998. Print.

McEwan, Patrick J., Miguel Urquiola, and Emiliana Vegas. “School Choice, Stratification, And Information On School Performance: Lessons From Chile.”Economia 8.2 (2008): 1-42. Social Sciences Full Text (H.W. Wilson). Web. 5 May 2016.


Murnane, Richard J., Lindsay Page, and Emiliana Vegas. “Distribution of Student Achievement in Chile Baseline Analysis for the Evaluation of the Subvencion Escolar Preferential, SEP (Preferential School Subsidy).” The World Bank (2010). Web. 4 May 2016.


Somers, Marie‐Andrée, Patrick J. McEwan, and J. Douglas Willms. “How Effective Are Private Schools in Latin America?” Comparative Education Review 48.1 (2004): 48-69. Web.

Winkler, Donald R., and Alec I. Gershberg. “Education Decentralization in Latin America: The Effects on the Quality of Schooling.” Annual World Bank Conference on Development in Latin America: Decentralization and Accountability in the Private Sector (1999): 203-20. Web. 10 Apr. 2016.

One thought on “School Choice Through the Private Sector: A Chilean Method of Education Reform”

  1. Michelle, this essay poses three thoughtful questions: how have choice policies in Chile changed since the 1980s, how have these affected school enrollments, and how has public opinion shifted? Given the depth of these questions, readers like me expect to see a richer thesis paragraph. The first third of the thesis tells us what we already learned in the prior paragraph: Chile adopted market-based choice policies in the 1980s. The second and third parts of the thesis are more informative, by pointing to rising private school enrollments and shifting public opinion. What’s still unclear is whether your essay will tell us why this opinion shift is happening: are you stating that it is caused by public concerns over increasing stratification?

    The body paragraphs of this essay were much stronger, and told a coherent story about how Chilean market policies emerged during government restructuring of the Pinochet regime. Your analysis of the middle class embracing private education, “once reserved for the most privileged,” was very persuasive. Also, your evidence on increasing stratification of the schooling system is insightful. Regarding the Penguin Revolution, I encourage you to look at Jackie Kahan’s senior research project from 2008:

    Overall, the body of this essay is exceptionally strong and I look forward to assigning it to future students, especially to encourage them to study non-US topics in my admittedly US-centric ed reform course.

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