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The Privatization of Social Services in Chile: an Evaluation

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  • Ronald Fischer
  • Pablo González
  • Pablo Serra

    ()

Abstract

We examine the privatization of Chilean social services that began in 1981. We conclude that the reform has had a positive impact by providing competition to public providers (health and education) and insulation from political capture (pension funds). The major lesson, however, is that the full benefits from privatization-cum-competition are slow to arrive and require able regulators to achieve them. Some of the benefits of competition are lost through rent dissipation, especially in the providers’ search for the more attractive customers. These rents are due in part to the limitations of consumers when deciding on highly complex issues under asymmetric information. Another source of inefficiency is regulations introduced to avoid moral hazard problems, but which also have the effect of limiting competition. The performance of social service markets is improving, and this can be attributed to changes in regulation (fewer restrictions and more transparency), the consolidation of the industries, and hypothetically, better decisions on the part of consumers.

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Bibliographic Info

Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 167.

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Date of creation: 2003
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Handle: RePEc:edj:ceauch:167

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  1. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
  2. Winkler, Donald R. & Rounds, Taryn, 1996. "Municipal and private sector response to decentralization and school choice," Economics of Education Review, Elsevier, vol. 15(4), pages 365-376, October.
  3. Hanushek, Eric A, 1995. "Interpreting Recent Research on Schooling in Developing Countries," World Bank Research Observer, World Bank Group, vol. 10(2), pages 227-46, August.
  4. Hanushek, Eric A. & Rivkin, Steven G., 2006. "Teacher Quality," Handbook of the Economics of Education, Elsevier.
  5. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
  6. Diamond, Peter & Koszegi, Botond, 2003. "Quasi-hyperbolic discounting and retirement," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1839-1872, September.
  7. Caroline M. Hoxby, 2003. "The Economics of School Choice," NBER Books, National Bureau of Economic Research, Inc, number hox03-1, October.
  8. Sendhil Mullainathan & Richard H. Thaler, 2000. "Behavioral Economics," NBER Working Papers 7948, National Bureau of Economic Research, Inc.
  9. Peter A. Diamond, 2000. "Administrative Costs and Equilibrium Charges with Individual Accounts," NBER Chapters, in: Administrative Aspects of Investment-Based Social Security Reform, pages 137-172 National Bureau of Economic Research, Inc.
  10. Mizala, Alejandra & Romaguera, Pilar, 2001. "Factores socioeconómicos explicativos de los resultados escolares en la educación secundaria en Chile," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(272), pages 515-549, Otubre-di.
  11. Ronald Fischer & Rodrigo Gutiérrez & Pablo Serra, 2002. "The Effects of Privatization on Firms and on Social Welfare," Documentos de Trabajo 131, Centro de Economía Aplicada, Universidad de Chile.
  12. Chang-Tai Hsieh & Miguel Urquiola, 2003. "When Schools Compete, How Do They Compete? An Assessment of Chile's Nationwide School Voucher Program," NBER Working Papers 10008, National Bureau of Economic Research, Inc.
  13. Ronald D. Fischer & Pablo Serra, 1997. "Análisis económico del sistema de seguros de salud en Chile," Documentos de Trabajo 17, Centro de Economía Aplicada, Universidad de Chile.
  14. Eric A. Hanushek & Steven G. Rivkin, 2003. "Does Public School Competition Affect Teacher Quality?," NBER Chapters, in: The Economics of School Choice, pages 23-48 National Bureau of Economic Research, Inc.
  15. Alejandra Mizala & Pilar Romaguera, 2000. "School Performance and Choice: The Chilean Experience," Journal of Human Resources, University of Wisconsin Press, vol. 35(2), pages 392-417.
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