Destructive creation: school turnover and educational attainment

Abstract

This paper studies the e ect of school entry and exit in the Chilean market-oriented educational system. During the period 1994-2012, 2,151 schools closed, roughly one- fth of the current stock of schools. At the same time 3,770 new schools entered the school system, mostly private-voucher schools. Given this signi cant school turnover we use a large panel of administrative data, which contains individual students' academic achievement and socio-demographic characteristics, to estimate the potential educational costs of this dynamics. We identify a causal e ect of school closures on grade retention and school dropouts. School exit is associated with a 44 percent increase in the probability of grade repetition in 5th grade (2.2 percentage points) and a 79 percent increase in the probability of school dropout in tenth grade (1.1 percentage points). We also estimate the potential \productivity gains" associated to market's creative destruction dynamics by studying its impact on the schools contribution to students' educational achievement. We nd that, at the municipality level, school turnover predicts improvements in school performance -after controlling for students' socioeconomic status- only for low population municipalities, while it has no e ect for high population municipalities located in urban areas with intense market dynamics. Moreover, we nd a negative impact on school performance if turnover is associated with a signi cant school replacement