Is private education worth it? Evidence from school-to-work transitions in Chile

• Published in: Labour economics Vol. 90; p. 102598
• Main Authors: Contreras, Dante, Rodríguez, Jorge, Urzúa, Sergio
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01-10-2024
• Subjects: Income inequality; Returns to education; School choice; Income inequality; I24; School choice; Returns to education; J24
• ISSN: 0927-5371
• DOI: 10.1016/j.labeco.2024.102598

Using comprehensive longitudinal data from Chile, we examine the impact of attending a private high school on labor market outcomes. The empirical strategy exploits conditional independence assumptions and leverages the effects of self-selection based on ability. We establish that private high schools boost average adult earnings by 99–144 dollars a month (relative to public schools), equivalent to a 15%–22% premium. We then explore potential channels behind these effects. Both academic and non-academic factors emerge as mediators. Our findings highlight the importance of financial resources, as education investments have long-term impacts on private high school students, while yielding negligible effects for those attending public and voucher schools. Finally, we document the prominent role of firms as mediators of the private school advantages during the school-to-work transition. Our analysis provides new insights into the association between school choice and income disparities, even after controlling for pre-labor market academic performance.
•Attending a private high school in Chile, relative to a public institution, increases future earnings by 99–144 dollars per month (a 15%–22% premium).•Both academic and non-academic factors mediate the returns to private schools.•The effect of education investments at the school level on students’ earnings is notably higher for private schools.•Most of the long-term effects of private schools are explained by within-firm variation.