How might education voucher programmes be useful in developing countries? What kinds of voucher programmes would be most appropriate, and what institutional infrastructure will be important for their implementation? This paper from the World Bank examines the theoretical arguments for education vouchers, using a principal-agent perspective. It reviews experience of vouchers from both industrialised and developing/transition countries. The authors conclude that vouchers for basic education in developing countries can enhance outcomes when they are limited to modest numbers of poor students in urban settings.
Educational systems in developing countries are characterised by significant deficits in affordable access, and large differences in attainment between children from poorer and rich households. Government spending is often insufficient, and inefficiently and inequitably allocated. Voucher programmes have emerged as one solution. A principal-agent framework sees the state as a ‘principal’ which pays schools, its ‘agents’, for providing educational services that further its objectives. Vouchers allow parents to choose schools, create intense incentives for schools to increase enrolment, and grant schools management autonomy to respond to demand. However, there is little empirical evidence on the effects of voucher programmes in the few developing countries where they have so far been implemented in some form.
A principal-agent perspective points to the following insights on how voucher schemes might function in developing countries:
- As parents have a tendency to conflate the composition of a school’s student body with learning opportunities, voucher programmes can create a strong incentive for schools to select advantaged students.
- In programmes with wide eligibility, the ability of schools in developing countries to improve learning among large numbers of students is likely to be limited by factors beyond the schools’ control, such as textbook shortage.
- Voucher programmes do not reward innovation and are therefore unlikely to promote diversity and innovation in teaching if parents are pedagogically conservative.
- Teachers and school owners in developing countries are less comfortable with risk. Outright voucher programmes in which teachers are laid off and schools are closed have a higher welfare cost in developing countries.
- For the incentives involved in a voucher system to be useful, there must be a functioning monitoring system and a strong current of professionalism amongst educators.
In developing countries, vouchers for basic education can be useful in small doses. Programmes involving limited numbers of poor students in urban settings, particularly in conjunction with existing private schools with surplus capacity, can have dramatic effects on the achievement of participating students. For effective voucher programmes it is advisable to:
- Create a system to monitor enrolment rates and processes within schools.
- Devise a system to mitigate pressures for schools to select advantaged students, such as setting the voucher value for disadvantaged students at higher levels, or restricting eligibility to the poor.
- Finance and support teacher training and professional development in private schools.
- Work with risk-averse teaching staff.
