Very Preliminary Sebastian Galiani Paul Gertler Ernesto Schargrodsky February 2004, DC.

1. Helping the Good Get Better, but Leaving the Rest Behind:How Decentralization Affects School Performance Very Preliminary Sebastian Galiani Paul Gertler Ernesto Schargrodsky February 2004, DC.

2. School Decentralization • An important piece of the major structural reforms undertaken in Argentina in the early 1990’s was the decentralization of education services from the federal government to the provincial governments. • Between 1992 and 1994, the national government transferred to the provincial governments all its dependent secondary schools.

3. School Decentralization • The decentralization experiment generated an exogenous variation in the jurisdiction of administration of secondary schools across time and space. • We exploit this instrument to identify the causal effect of school decentralization on education quality, measured by the outcome of a standardized test of Language and Mathematics administered to students in their final year of secondary school. • We also explore whether the effect of decentralization depends on province or municipality characteristics.

4. Decentralization • The main argument in support of decentralization is to bring decisions closer to the people. • The effect of information asymmetries, idiosyncratic preferences, agency costs and collective decision problems can be alleviated through decentralization. • Moreover, decentralization can foster competition.

5. Decentralization • However, decentralization can also worsen the provision of public goods in the presence of positive spillovers, lack of technical capabilities by local governments, or capture of low-level administrations by local elites. • The theoretical literature obtains trade-offs without universal superiority of centralization or decentralization in the provision of public services. • Advantages and disadvantages of decentralization need to be evaluated empirically.

6. Decentralization • We hypothesize that the effect of decentralization on test scores is stronger when schools are transferred to provinces that are fiscally better managed, and possibly negative for provinces that run significant fiscal deficits and are poorly managed. • Finally, Decentralization had possibly negative effects in poorer communities. • We hypothesize that poorer communities may have less of a voice in exploiting the advantages of decentralization.

7. School Decentralization in Argentina • School services were provided by public (national, provincial, and municipal) and private schools. • By Law 24.049 (December 5, 1991), national secondary schools were transferred from the national government to the provincial governments (decentralization of primary and pre-schools had taken place between 1961 and 1978). • Before the Decentralization Law, most Argentine provinces already administered a significant proportion of secondary schools.

8. School Decentralization in Argentina • The Decentralization Law stated that school transfers would be scheduled through the signature of bilateral agreements between the federal government and each province. • The signature of these agreements introduced variability across provinces in transfer dates. School transfers took place between February 1992 and January 1994. • The heterogeneity originated in political conflicts between the Nation and the provincial governments (Rothen, 1999). • The transfer dates were unrelated to education quality.

9. Decentralization in Argentina transferred secondary schools from the federal government to the provincial governments. • The transfer included the budget and the personnel increasing both province expenditures and province revenues. • The transfer affected the most important school decisions (OECD, 1998; Burki et al, 1999; Llach et al, 1999). • The determination of expenditures, the allocation of personnel and non-personnel budget, the appointment and dismissal of directors, teachers and staff, the wage decisions, the definition of the calendar year, and the opening or closure of schools and sections are decisions transferred with the schools from the nation to the province levels.

10. Table I: School Administration Responsibilities of National and Provincial Authorities Before and After Decentralization

11. Table I: School Administration Responsibilities of National and Provincial Authorities Before and After Decentralization

12. Standardized Tests • Since 1993, the National Education Ministry annually tests fifth-year secondary school students in Language and Mathematics. • Although we recognize that standardized test scores do not capture all the dimensions of school achievements, we use these uniform, popular, monotonic, and good quality variable to measure school quality. • The 1993 test was experimental and the results are not available at the school level. For 1994 through 1996, a sample of students was tested in each province. After 1997, every fifth-year student has to answer the test.

13. Our empirical exercise • We estimate a general version of a diff-in-diff model: • Where s indexes the number of years school i has been under local administration in year t, and all exposures greater than five are restricted to having the same impact as five years of exposure. • The base category is the always provincial schools.

20. Conclusions • Although there is a wide theoretical literature that outlines the pros and cons of decentralization, there is no previous evidence on the causal effect of school decentralization on education quality. • The contribution of this paper is to evaluate the impact of the Argentine secondary school decentralization program on students’ standardized test scores. • Our results suggest that decentralization improved the performance of students in test scores. • Although decentralization may be generally optimal, its advantages may dilute when schools are transferred to severely mismanaged provinces or/and poor municipalities.