School closure and educational attainment: Evidence from a market-based system

This paper studies the effect of school closure in the Chilean market-oriented educational system. Between 2002 and 2011 the system exhibited a large turnover: 1282 schools closed -roughly one-tenth of the current stock- and 2350 new schools entered, mostly private-voucher schools. We use a large panel of administrative data, which contains individual students' academic achievement and socio-demographic characteristics, to estimate some of the potential educational costs of this dynamics. We identify a causal effect of school closures on school dropouts and grade retention. School closure increases the probability of high-school dropout between 49 and 68% (1.8 and 2.5 percentage points). Also, school exit implies between 3.9 and 4.4 percentage points increase in the probability of grade retention in fifth grade.