School Closure and Educational Attainment: Evidence from a Market-based System

This paper studies the effect of school closure in the Chilean market-oriented educational system. Between 2000 and 2012 the system exhibited a large turnover: 1,651 schools closed -roughly one-sixth of the current stock- and 3,029 new schools entered, mostly private-voucher schools. We use a large panel of administrative data, which con- tains individual students’ academic achievement and socio-demographic characteristics, to estimate some of the potential educational costs of this dynamics. We identify a causal effect of school closures on school dropouts and grade retention. School closure increases the probability of high-school dropout between 46 and 62 percent (1.7 and 2.3 percentage points). Also, school exit implies a 78 percent increase in the probability of grade reten- tion in fifth grade. If we only consider those students that switch school at the end of the 4th grade we find an increase between 4.8 and 4.9 percentage points in grade retention.