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This thesis analyses, using a quasi-experimental approach, the relationship between decentralization and education in Colombia, where in 1991 decentralization of the State was implemented.

The thesis focuses on two relationships: rst, the relationship between decentralization and quality of education; and second, this relationship across individuals with different incomes.

Theoretically, decentralization may increase the eciency in the provision of education, and therefore, we would expect an increment in educational quality in schools affected by decentralization. Furthermore, decentralization may create a more unequal distribution of educational quality, and therefore, we expect that the impact of decentralization is asymmetric with respect to income.

The thesis makes use of a new dataset that comes from two sources. First, data from the Ministry of Education provide an important array of school characteristics. Second, data from the ICFES, the institute in charge of administering standardized tests in Colombia, provide test scores and characteristics of individuals. We present three types of quasi-experimental models based on di erent control and treatment groups.

First, we estimate the e ect of decentralization on public schools, using private ones as a comparison group.

Second, we restrict the estimation to public schools, but now the treatment group is comprised of schools in initially highly dependent departments, and the control group of schools in departments with initially highly independent relationship with the central government.

Finally, the third model is a nested model of the rst two. It is a more exible model allowing nationwide e ects and public school effects.The empirical results are mixed. We nd a positive impact of decentralization in the rst two models.

However, the third model presents a negative result. The results from the tests on an asymmetrical impact of decentralization, depending on income, are mixed as well. In the last two models, the results are symmetric. However, in the rst model the results are asymmetric, and interestingly, in favour of low-income individuals. That is, decentralization increases the test scores for individuals at the left tail of the income distribution.

The trade of between efficiency and equality

The theoretical papers of this section present arguments on the potential e ects of decentralization and centralization on efficiency and distribution. This section has three subsections: informational issues and sorting, supply-side considerations, and externalities and strati cation. In the rst set of papers on informational issues the main conclusion is that the information held by local service providers suggest efficiency gains in the provision of the services in contrast with a central government, which presumably does not have complete information.

The sorting argument on public service provision draws conclusions from several papers in which people vote with their feet to nd their preferred consumption bundle for public services and taxes. Households will locate in those communities that provide their preferred consumption bundle and will pay the price (tax) charged for these services in the community.

This type of eciency argument embodies a correlation between high-income and high-level provision of services.The second set of papers on supply-side considerations looks into the problem of provision of services and the incentives that local suppliers have to give in orderto achieve the optimal level of services. The last set of papers on externalities and stratication argues in favor of centralization based on the presence of local externalities. There are eciency gains from centralization if there are peer e ects in education. There may, however, be general externalities that would favor decentralization on eciency grounds. The section ends with a discussion of this dichotomy.

Author: Felipe Barrera-Osorio, Doctor of Philosophy, 2003 University of Maryland


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