The Effects of Decentralization on Schooling: Evidence from the Sao Paulo State's Education Reform

Decentralization of the delivery of public services provision is an important governance reform recently witnessed in many developing countries. Public education has been one of the key public services devolved to lower level governments. This paper uses an exclusive and rich longitudinal data on primary schools to evaluate the effects of the decentralization reform implemented on the State of Sao Paulo, Brazil, on several indicators of school performance and school resources. Specific aspects of the Sao Paulo’s State education reform combined with the data available allow me to deal with some common identification issues encountered by previous empirical studies on the subject. I find conflicting results for different school quality measures; decentralization increased dropout rates and failure rates across all primary school grades but improved several school resources. Further empirical investigation suggests that the worsening of these school performance indicators for the two first grades was partially driven by the democratization of the school access promoted by the education reform. Evaluation of the distributive outcome of the reform suggests that its effects were more perverse for schools located on rural and poor areas. I also find evidence that decentralization widened the gap between the “good” and “bad” schools. Moreover, I find no evidence that the municipalities’ administrative experience affected the program’s outcome.