9/12/2023 - Economy and Finance

Incentive system under a scheme of educational vouchers

By Agustin Hernandez

Incentive system under a scheme of educational vouchers

For several months, the proposals of the candidate for president for Advanced Freedom, Javier Milei, are newspaper holders and occupy a large portion of the topics discussed on television. It is indisputable that suggestions such as dolarizing, closing ministries or restructuring the public education system very much draw the attention of the elector and are the center of discussion in the current political scene.

How does a voucher system work? What are we losing and winning when passing a system like this? What questions are there about your application?

The voucher system is an initiative that aims to improve the educational quality of schools, transforming the current form of state funding in public education. Education can be understood as any other scarce good: it has an offer and a demand that determines prices and quantities, and is subject to restrictions and incentives that shape the behavior in the market.

The proposal, in great strokes, is simple: the State is playing a different role in assisting people with low resources, subsidizing them so that they can choose the private college that most suits their preferences and leaving it the place of education provider (mostly) to the private sector. One way of thinking is that the State instead of serving and owning a kiosk, subsidize people of lower resources so they can buy in kiosco Private You want to.

What voucher system advocates argue is that there is a way for students to be able to receive free education without schools being property of the State. If the government instead of owning educational establishments simply financed the education of students in private schools, it would end with many inefficiencies created by conflicts of interests and problems of economic calculation.

Incentives under the current system

Conflicts of interests and inefficiencies in the state educational system exist and are clear. Just reflect on the fact that state schools monopoliize a basis of people that their only schooling option is free and therefore any educational quality that is offered to them will take equally, since precisely have no other option.

On the other hand, the State is commonly tempted to teach in public schools what the same State is suited to it in relation to the role it has in society. In other words, there is a conflict of interest in what the State teaches about the usefulness it has in society and that is why even so recurrently there are cases of indoctrination relevant today in Argentina.

It is also important to note that there are no incentives by the State to improve the quality of education, since they do not precisely achieve their monetary income directly from the users of it, but their financing has a nature of the involuntary. By not having to compete in the market or convince anyone who buys your product, the State has no reason to stop thinking if your product is more valued by its users than it is expensive, or if its quality is the appropriate one to maximize its benefits by minimizing costs. This is why their incomes do not come from a voluntary choice and the costs do not come out of the administrator's pocket, but are coercively financed and the State does not realize a cost for mismanaging a device that is not of its property, nor is it financed by its money.

The problem of economic calculation concerns the following: the State does not know (although it wanted) what is the social benefit of financing a project, because people are not paying in a way voluntary and there is prices formed by ende, it is not known how many people would really value it, given the quality, more than it would cost them.

The key to the pricing system is that it is the only way people have to demonstrate how much value a good and how many resources should be devoted to producing more of the same without a price system, it is not known whether it is occurring more or less than they really want from a good and therefore could be devoting resources of more or less. The State, by not putting a price for the education it offers, incurs in these problems and it is impossible to spend resources of taxpayers efficiently.

This whole system is essential to understand consumer priorities. For example, a school that has broken could be an indication that people would have preferred these resources to be spent on another project (e.g. another school that teaches different disciplines).

Incentives under the voucher system

As we have already said, with a voucher the schools would be at least mostly privatized and free. It would be a partially state system to a largely private one in which the only role of the state would be to subsidize the demand (the student). This would ensure competition between the different private schools to capture the demand of students, thus boosting the improvement of educational quality.

Only with this would we be eliminating the problem of incentives for quality provision, since we would incorporate more competition. We would also move away from the problem of lack of incentives to effectively manage schools. This is how the private school owner will seek to maximize their benefits without wasting money, in the end any extra penny is money from your pocket and not from other people.

What about the partisan indoctrination of some teachers? Well, as mentioned earlier, this system, based on competition, gives families the choice of college that most coincides with their preferences and teach the values they want to convey to their children. By not being state institutions, very diverse schools would be created, which their only incentive would be to satisfy what is that the demand ask them, because they would be funded stimulated by pleasing families, not in a coercive manner.


It must be borne in mind that much of the results of the programme depends on the way it is performed and that not everywhere it was conceived in the same way, this could clearly influence the incentives on the market.

In order to implement the system in Argentina, the education between the number of students to know how much you can fund each voucher. This is one of the central debates on the voucher, since it doubts the question of whether the budget would reach to finance the most expensive education in this regard. all students. If not, would there be schools covering families above what the State transfers them in the form of vouchers? Would that mean more inequality than there is today? Is it worth risking us being a less egalitarian society in exchange for everyone to receive better education? These questions probably need a more in-depth analysis, so we can observe how some countries have implemented voucher-like educational systems.

Sweden has chosen a format consisting of an educational voucher that accompanies the student by paying directly to the educational institution. This voucher can be used both in state educational centers where all children have their place assured, and those who are managed privately. The conditions for these institutions are, among other things, that they cannot charge an extra quota for families, nor reject postulants under any concept, which enter on request.

On the other hand, in Chile, changes in the educational system for a subsidy system began to be given in the late 1980s, where a system of state subsidies was installed for private and municipal establishments according to assistance. The new model enhanced the freedom to choose families for establishments to compete for capturing students, improving their quality. Although most of the literature recognize these reforms as a model I willParents never get a coupon. This is a particular model, where there is no coupon delivered to families, but that schools receive a subsidy according to their demand.

But not everything is as easy as it sounds and there are many questions that today are the less difficult to answer. For example: If education is free, wouldn't the best schools be burdened? Probably the best schools would have different prices just to adjust the number of students.One way to solve this could be that families transfer unused money from the voucher. That is, if the quota of the chosen school was lower than the maximum to cover by the voucher, the family is transferred in a check form the remainder not spent. Thus, someone might think they prefer to educate themselves in a “average” quality institution before “high” since it does not report so much utility to have high education and prefer to use the rest of the money to cover other needs. The problem of this case is that it could encourage some parents to spend much or the whole of the voucher on another well that it is not education which is not the purpose of the system.

There are also very important issues such as what would happen to schools that know deficits (e.g. a school in a people of Argentina, with few students) in case of installing a voucher system. Should I go bankrupt simply because I can't cover your expenses? In this case, there is a major debate on this. The main reason why a voucher system is to reduce inefficient expenditure and increase the quality of education, but that does not mean that people are left behind. The project is proposed to privatize as many schools as possible, although this does not mean that some public schools have to cease to exist in specific areas as in this case.

To conclude, there are many open questions about this system that is discussed in Argentina today. In the study of the economic development of countries it is very important for education, and rightly. It is not only a right to have access to quality education, but there are several researches on the positive impact that have a few years of education in salary and quality of life, not only in the most educated people, but also in what has decided not to continue with their studies, but is benefited by the technological innovations of those who yes.

We often fill in information on a topic and while more we investigate, more we lose. I hope that this article instead of generating conflict or confusion will help us to think more deeply about this topic that occupies such a central place in the Argentinean debate.

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agustin hernandez

Agustin Hernandez


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