Is Private Education Worth it? Evidence from School-to-Work Transitions

We estimate the impact of private schools on labor market outcomes. Using rich longitudinal data from Chile, we find that attending private-fee-paying schools boosts average adult earnings by 100-140 dollars a month, equivalent to 15-22% return (relative to public schools). The advantage of private education also emerges at the intensive margin of investments. For private fee-paying schools, a one percent increase in per-pupil spending leads to at least 23 extra dollars
in adult monthly earnings. For public and voucher schools the effect is negligible. These results are robust to different specifications, including regressions that control for pre-labor market ability, school quality measures, individual-level education spending, and firm fixed-effects. Our analysis provides new insights into the association between school choice and income inequality.