Juan Pal, Escuela de Gobierno UC

Paper: Education Policy and the Quality of Public Servants

Abstract: This paper studies the design of higher education policies targeted at improving the recruitment of public servants. I leverage the introduction of a policy in Chile that aimed to increase teacher quality by combining financial incentives and admission standards. Exploiting a sharp assignment rule for financial incentives eligibility, I estimate that, at the threshold, enrollment of high performing students at teacher colleges increased by 42%. For low-income students, two thirds of the increase is due to switching away from non-enrollment. The policy led to a 0.25SD increase in the scores at the college entrance exam, which translated into a 0.11SD increase in Teacher Value Added (TVA). I embed the reduced-form results into a demand and supply model of higher education that incorporates a novel method for solving discrete-continuous games in large markets. Alternative combinations of incentives and admission standards lead to increases of up to 6.6% in the test scores of students enrolled at teacher colleges, and up to 20% in TVA. Targeting the policy to low-income students yields further gains in TVA at no additional cost. To achieve similar gains, the expected wages of graduates from teacher colleges would need to increase by approximately 35%, highlighting the cost-effectiveness of the policy.