Education and fiscal decentralization. The case of municipal education in Chile

Chile implemented a radical reform in favor of decentralization at the beginning of the 1980s, with municipalities taking over the administration of public school education. The government that came to power in 2014 is committed to revert this reform, removing public schools from municipal control. Using panel data gathered between 2005 and 2013, this study shows that municipalities with greater autonomy performed better when administrating schools. Two major conclusions may be drawn. First, selective decentralization in favor of more autonomous municipalities is a better public policy approach relative to an all across the board solution. Second, since this autonomy is very unevenly distributed across municipal governments, a renewed and more effective fiscal equalization system should be established in Chile.