School Decentralization: Helping the Good get Better, but Leaving the Poor Behind

Sebastian Galiani, Paul Gertler and Ernesto Schargrodsky , Journal of Public Economics 92(10-11) , 2106-2120 , October 2008.

The decentralization of public services from central to local control is a major feature of institutional innovation throughout the world. The main argument in support of decentralization is that it brings decisions closer to the people, alleviating information asymmetries, agency costs, and problems of collective decision. However, decentralization can also degrade service provision if local governments have weak technical capabilities or poor communities lack the ability to voice their preferences. Thus, decentralization may increase inequality if central provision guarantees a minimal provision level, whereas some regions and social groups are disadvantaged under decentralization. In this paper, we test the hypothesis that decentralization of secondary schools increased inequality of educational outcomes in Argentina. Our results show that decentralization had, on average, a positive and significant impact on student performance. Unfortunately, the effect seems negative for schools located in poor areas of provinces with weak technical capabilities. 

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