Estimating the Effects of School Subsidies Targeted at Low-Income Students: Evidence from Chile

The aim of this paper is to evaluate the effect of school subsidies targeted at socioeconomically disadvantaged students on academic performance. To do so, the empirical strategy relies on comparing the standardised test scores of different cohorts of students over time. These cohorts have been exposed differentially to the Preferential School Subsidy Law, promulgated in Chile in 2008. In particular, I develop suitable differences-in-differences and individual fixed-effect estimators to compare the differential growth of test scores among four cohorts of students. The results indicate that, overall, the intervention has a positive effect on the average gain in reading and maths test scores. In addition, the estimations suggest that the longer the exposure to the programme the larger the effect on the average growth in test scores. However, the effect is larger for non-priority students than for priority students. The effect can be ascribed to the pedagogical actions taken by schools and not to school choice.