_Chile._ Starting in 1980, Chile transferred management of primary and secondary schools to municipalities, abolished pay scales and civil servant protections for teachers, started to finance municipal and non-fee-charging private schools at equal rates tied strictly to attendance, and encouraged parents, whose enrollment choices were not restricted to residential zones, to choose schools based on performance. The democratic government that assumed power in 1989 re-established salary scales and employment protection for teachers, but in other respects it maintained Chile's voucher system. It remains probably the closest national-level approximation of a voucher system among developing countries (Gauri 1998).

The Chilean voucher system led to a dramatic increase in students enrolled in private voucher schools, whose enrollment share increased from 15 percent in at the beginning of the 1980s to 33 percent in 1996, almost entirely at the expense of the municipal schools' share. Although teachers did shift to the private subsidized sector, almost no municipal schools were closed. There is evidence that the private subsidized schools in Chile perform better, based on test scores, than municipal schools (Aedo and Larrafiaga 1994, Rodriguez 1988), but this private advantage disappears or turns negative when student-level socio-economic data are included as controls (Mizala and Romaguera 1998, McEwan 2001). McEwan and Carnoy (2000) find that Catholic schools perform better than municipal and non-religious private voucher schools, but that they spend more per student than the other groups of schools. A study that attempted to measure the effects of private school competition on municipal schools found that communities with higher concentrations of private school enrollment had modestly higher positive test scores in the national capital (a net 0.2 standard deviation gain over fifteen years), but small negative effects in the rest of the country (McEwan and Camoy 1999). Another study found that communities with higher private enrollment shares saw public school performance fall from 1982-1988 (though the point estimate was significant only at the 10 percent level), and concludes that even if a voucher system creates incentive effects that lead to improvements in municipal schools, the fact that the better students migrate from municipal to private schools could lead to an overall decline in municipal school performance (Hsieh and Urquiola 2002). That same study argues that although small numbers of public students might benefit from vouchers to attend public schools, when a voucher system induces large number of students to move to private voucher schools the overall impact can only be assessed by taking the sum of the (assumedly positive) effect for the migrating students, the (assumedly positive) effect of competition on public schools, and (assumedly negative) effect of the loss to public school students of their most talented peers. It concludes that national aggregate indicators of achievement, including Chile's ranking in international test scores and the achievement gap between subsidized and non-subsidized elite schools, did not change. There is also evidence that schools in all sectors in Chile took active measures to select more advantaged students during this period (Gauri 1998, Espinola 1995).

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