Value Added and Contextual Factors in Education: Evidence from Chilean Chools

There is consensus in the literature about the need to control for socioeconomic status and other contextual variables at student and school level in the estimation of value added models, for which methodologies rely on hierarchical linear models. However, this approach is problematic because the nature of their estimate is a comparison with a school mean, implying no real incentive for performance excellence. Meanwhile, activity analysis models recently developed to estimate school value added have been unable to control for contextual variables. We propose a robust frontier model to estimate contextual value added which integrates recent advances in the activity analysis literature. We provide an application to a sample of schools in Chile, where reforms have been made in the educational system focusing on the need for accountability measures. Results indicate the general relevance of including contextual variables, and explain the performance differentials found for the three school types.