Is private education worth it? Evidence from school-to-work transitions in Chile

Abstract

Using comprehensive longitudinal data from Chile, we examine the impact of attending a private high school on labor market outcomes. The empirical strategy exploits conditional independence assumptions and leverages the effects of self-selection based on ability. We establish that private high schools boost average adult earnings by 99-144 dollars a month (relative to public schools), equivalent to a 15%–22% premium. We then explore potential channels behind these effects. Both academic and non-academic factors emerge as mediators. Our findings highlight the importance of financial resources, as education investments have long-term impacts on private high school students, while yielding negligible effects for those attending public and voucher schools. Finally, we document the prominent role of firms as mediators of the private school advantages during the school-to-work transition. Our analysis provides new insights into the association between school choice and income disparities, even after controlling for pre-labor market academic performance.