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Albert Hirschman's Exit-voice Framework and

its Relevance to Problems of Public EducationPerformance in Latin AmericaJonathan Di John

Published online: 04 Sep 2007.

To cite this article:Jonathan Di John (2007) Albert Hirschman's Exit-voice Framework and its Relevance to Problems of PubEducation Performance in Latin America, Oxford Development Studies, 35:3, 295-327

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Albert Hirschmans Exit-voice Frameworkand its Relevance to Problems of PublicEducation Performance in Latin America

JONATHAN DI JOHN*

ABSTRACT This paper applies Albert Hirschmans exit-voice framework to the problems ofeducation coverage and quality in Latin America. It argues that the combination of low directtaxation and high levels of private primary enrolment provides exit options for the wealthy andreduces their incentive to exercise their voice, or protest mechanisms, in the face of poor

education performance. It also argues that fragmented and clientelist political party structures limit

the provision and monitoring of public education, and also reduce the political capacity of the poorto exercise their voice regarding public education coverage and quality. The main policy implicationof the paper is that good governance in education cannot realistically be addressed without

analysing how the structure of power and voice, and of conflicts of interest within civil society, affectthe actual political pressures that state institutions face.

1. IntroductionIn the period 19702000, the coverage and quality of primary and secondary school public

education in Latin America was disappointing. Education indicators in the region lag

behind many East Asian and Eastern European economies despite similar per capita

incomes across the three regions. Moreover, within Latin America, Cuba stands out as thecountry with the best education system, despite having one of the lowest per capita

incomes in the region. In the literature that has explored Latin Americas poor education

performance, two types of explanations dominate. The first focuses on the identification of

a series of sub-optimal policies and institutions that result in inefficiencies in the use of

public resources, such as disproportionately high spending on higher education. A second

explanation stresses the role that high levels of income and asset inequality play, from both

the supply and demand side, in reducing human capital accumulation (Birdsall &

Londono, 1998; Mariscal & Sokoloff, 2000). While both of these explanations generate

important insights, they are subject to shortcomings. The first type of explanation fails to

ISSN 1360-0818 print/ISSN 1469-9966 online/07/030295-33

q 2007 International Development Centre, Oxford

DOI: 10.1080/13600810701514860

I would like to thank Francisco Gutierrez Sanin, Jo Beall, Rosemary Thorp, and Judith Tendler for helpful

comments on an earlier draft. I would also like to thank the Crisis States Programme, London School of

Economics for funding part of this research and my participation in the seminar: Development and Conflict: The

Ideas of Albert Hirschman, Bogota, Columbia, November, 2005. The usual disclaimers apply.

*Jonathan Di John University of London, School of Oriental and African Studies, Department of Development

Studies, Thrornhaugh Street, Russell Square, London WC1H 0XG. UK.

Oxford Development Studies,

Vol. 35, No. 3, September 2007


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elucidate why such policies and institutionspersist, or why decision-makers do not correct

such mistakes despite widespread knowledge of the relevant problems. The emphasis oninequality, meanwhile, cannot explain why students in all of the countries in the region,

apart from Cuba, under-perform despite the substantial variation in income inequality

across countries, or why students in countries with Latin American levels of income

distribution such as Malaysia do better in international tests.

This paper presents an alternative explanation for the persistence of sub-optimal

education policies, coverage and quality in Latin America. One factor that is not

adequately addressed in the literature is why interest group pressure from within civil

society and within political parties to improve education performance is so weak in many

(though not all) countries in the region. As many Latin American polities have shifted to

more democratic politics, the reasons behind the failure of civil society pressure

effectively to demand better public services, like education, provide a window into

understanding the political and institutional obstacles to achieving a more effective,developmental and just democracy overall.

I argue that revisiting and applying the insights of Albert Hirschmans exit-voice

framework provides important clues to the general problem of ineffective interest group

pressurevis-a-vispublic education in Latin America. The main argument of the paper is

that an important part of the problem is the absence ofincentivesfor upper-income groups

to exercise their considerable political power and voice, or protest mechanisms, to

demand improvements. I suggest that there are two reasons why upper-income groups may

have weak incentives to demand better public education. First, the generally higher supply

of private schooling in Latin America (compared with other middle-income countries in

East Asia and Eastern Europe) provides exit options for the upper-income groups to

send their children to private schools at the primary and secondary level; because upper-

income groups have options to use private services in education, they have a reduced need

to exercise their political voice in the context of deterioration in the quality and coverageof public education. As Hirschman (1970) argued, the greater use of exit options can

atrophy the development of voice.

Second, upper-income groups in the region pay negligible amounts of direct personal

and property taxes compared with middle-income countries in East Asia and Eastern

Europe. Direct taxation is an important nexus through which the state and upper-income

groups develop strong mutual obligations (Lieberman, 2002). In middle-income countries,

the top 10% of income earners are the main group that can potentially pay the bulk of

personal income and property tax. Low levels of direct personal income and property

taxation weaken the link between state and upper-income citizens and as a result further

reduce the incentives upper-income groups have to exercise voice over poor public service

provision.

The reason for examining the role of upper-income groups in Latin America is that their

economic and political powervis-a-visthe state is very strong in comparison with similargroups in many other middle-income countries. Evidence of this is not hard to find. First,

upper-income groups, particularly the top 10% of income earners, appropriate

extraordinarily high shares of national income in Latin America (Inter-American

Development Bank, 1998). Second, wealthy landowning elites there have been able to

resist any attempts at large-scale agrarian reform throughout the 20th Century. Third,

upper-income groups (as noted) pay very low levels of personal income tax in comparison

with those in middle-income countries in other regions. Since personal income tax is

296 J. Di John


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demand for private schools; higher personal income tax payments; effective political party

capacity to monitor public education; and insufficient household income to afford private

education in the absence of state subsidization of private education. The paper will address

the extent to which these propositions explain Latin Americas disappointing performance

in education coverage and quality relative to middle-income countries in East Asia and

Eastern Europe as well the extent to which it explains variations within education

performance across countries withinLatin America.

The paper suggests the following research questions that might emanate from an

application of Hirschmans exit-voice framework: What are the prospects of building

coalitionsbetween the poor and elites/non-poor groups, when the latter have the options to

useprivateservices (such as health, education, security), that is, exit from public service

use? Moreover, if elites/non-poor groups have the political clout to avoid paying direct

taxes, does this lessen even further their interest in public service delivery? Finally, howdoes the nature and structure of political parties within Latin America affect the

possibilities of organizing voice among the poor and of initiating pro-poor education

and tax reform? These questions are often avoided in discussions of good governance by

donors because they require the kinds of explicit political judgements that donors are

uncomfortable making.

Section 2 presents the deterioration in Latin Americas education performance in the

period 19702003. Section 3 critically examines some common diagnoses of the nature of

the problem. I find that the identification of policy and institutional failures is an

inadequate explanation of why theses sub-optimalities persist, especially since there is

widespread knowledge of the existence of more efficient and equitable alternatives.

Moreover, I find that the extent to which inequality negatively affects education coverage

and quality is subject to important qualifications. Section 4 presents and applies

Hirschmans exit-voice framework to the problem of public education delivery in theLatin American context. I argue that the combination of high levels of private education

options combined with low levels of direct (income and property) taxes lessens the

incentives elites have to use voice in the face of deteriorating public education quality.I also suggest that the existence of fragmented and clientelist political party structures

lowers the chance that alliances can be built to organize voice and thus pressure the state to

push for large-scale education reform. Section 5 considers the extent to which the

framework put forward accounts for variations in education performance within Latin

Table 1. Factors influencing the use of exit and voice options when public school quality declines

Exit options tend to increase with: Voice options tend to increase with:

1) greater state-funding of non-state schools(religious, private) which increases thesupply of non-state education andenables more households to afford privateeducation

1) lower state-funding of non-state schools(religious, private) which reduces the supplyof non-state education andlimits the numberof households that can afford privateeducation

2) lower personal income tax payments 2) higher personal income tax payments3) ineffective political party capacity to

monitor public education3) effective political party capacity to

monitor public education4) household income sufficient to afford

private education irrespectiveofstate-funding of non-state schools

4) household income insufficient to affordprivate education in the absenceofstate-funding of non-state schools

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America. Section 6 summarizes the results and provides some policy implications,

including an analysis of why vouchers to subsidize private education have haddisappointing results. The Conclusion provides theoretical and policy implications for

governance reforms more generally.

2. Latin American Education Performance in Comparative Perspective

The performance of the education system throughout Latin America has been

disappointing, particularly in the period 19702003 (Kaufman & Nelson, 2004b). This

is not to deny that progress has been made over a longer time period. In the period from the

end of World War II to the beginning of the 1980s, adult illiteracy in the region declined

from 34 to 13% (Puryear, 1997, p. 4). In comparative perspective, however, youth

illiteracy rates on average in Latin America still exceed any countries with similar and

even much lower per capita income levels, as indicated in Table 2.

In 2001, the average Latin American male youth illiteracy rate was 2.7% and the

average female youth illiteracy rate was 2.2%, compared with averages of 1.2 and 1.8%,

respectively, in East Asia, and averages below 0.5 and 0.5%, respectively, in Eastern

Europe. Brazil had the highest levels of youth illiteracy in Latin America. Cuba, China,

Indonesia, Thailand and the Philippines, all with muchlowerincome per capita levels than

the Latin American average, had achieved by 2001 youth illiteracy rates similar to or

below the Latin American averages, as indicated in Table 2.Latin America has indeed made important strides in increasing the number of school

years attained. In the period 1980 2000, the mean years of education of the adult

population aged 25 and older went up by 1.7 years in Latin America (from 4.1 to 5.8 years)

(de Ferrantiet al., 2003, p. 3). However, since 1970, relative to its per capita income level,

Latin Americas performance in human capital accumulation has been weak compared to

other regions (Birdsall & Londono, 1998). Average school attainment in the 1990s wasnearly 2 years below what would have been expected given the regions average per capita

income. Latin American adults have 1.4 fewer years of education and East Asian adults

have 0.4 more years of education than would be expected from their income levels

(de Ferranti et al., 2003, p. 3).

The region has a particularly large deficit in enrolment in secondary education. Latin

America has an average deficit of approximately 20 percentage points in net secondary

enrolment and 10 percentage points in gross tertiary enrolment given its average income

level, while East Asia has surpluses of more than 17 and 15 percentage points, respectively

(de Ferrantiet al., 2003).2 Cross-country evidence suggests that within Latin America the

biggest deficits in secondary enrolment are found in Brazil (36 points), Venezuela

(42 points) and Costa Rica (24 points). In contrast, many of the countries in the English-

speaking Caribbean, including Jamaica and Trinidad and Tobago, have net secondary

enrolment rates that are substantially higher than expected for their income levels(de Ferranti et al., 2003, Fig. 2.2, p. 29).

One of the main sources of this deficit in secondary school enrolment is the high

repetition and drop-out rates in primary school. Repetition rates in primary and secondary

school are higher than would be expected for the regions per capita income (Kaufman &

Nelson, 2004c, p. 249). Latin America has by far the highest repetition and drop-out rates

when compared with East Asia and the transition economies in Eastern Europe. 3 Average

repetition rates in primary school in the region have improved from 16% in 1965 to 10% in

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1990. However, the 10% repetition rate was still over three times the rate in East Asia (3%)

and the centrally planned economies of Eastern Europe (3%). Average repetition rates in

secondary school in the region were lower over the same period (remaining at 8%), but

have not improved over time. In 1990, average repetition rates in secondary school in

Latin America (8%) were double the rates in East Asia (4%) and four times the ratesin Eastern Europe (2%). Most concerning are the very high levels of drop-out rates in

primary education in Latin America. In 1990, average drop-out rates in primary school in

Latin America (36%) were nearly three times the rates in East Asia (13%) and four times

the rates in Eastern Europe (9%).

There is no evidence to suggest that Latin Americas comparatively poor performance

in education is due to insufficient public spending on education.4 In 1990 and 1995,

average public education spending in Latin America was 3.2 and 3.9% of GDP,

Table 2. Youth illiteracy rates in Latin America, East Asia South Africa and Eastern

Europe (percentage ages 1524)

Male FemaleGDP

1990 2001 1990 2001 per capita (2000 US$)

Latin America Average 4.2 2.7 4.3 2.2 $4,053Argentina 2 2 2 1 7,726Chile 2 1 2 1 4,964Costa Rica 3 2 2 1 4,185Peru 3 2 8 5 2,046RB Venezuela 5 3 3 1 4,818Ecuador 4 2 5 3 1,283Mexico 4 2 6 3 5,935Colombia 6 4 4 2 1,979Brazil 9 6 7 3 3,537

CaribbeanTrinidad and Tobago 0 0 0 0 6,326Cuba 1 0 1 0 ,1,500Jamaica 13 9 5 2 2,873Dominican Republic 13 9 12 8 2,414East Asia Average 2.5 1.2 4.2 1.8 3,240Korea 0 0 0 0 10,890Thailand 1 1 2 2 2,020Philippines 3 1 3 1 990China 3 1 7 3 856Malaysia 5 2 6 2 3,881Indonesia 3 2 7 3 800Vietnam 6 5 6 4 397

South Africa 11 8 12 9 3,019

Eastern Europe Average 0* 0 0 0 4,327Latvia 0 0 0 0 3,259Estonia 0 0 0 0 3,987Poland 0 0 0 0 4,309Hungary 0 0 0 0 4,656Czech Republic 0 0 0 0 5,422

Note: 0 indicated less than 0.5.Source: World Bank, World Development Indicators.

300 J. Di John


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school and 3.7% in pre-university, all well below regional averages (Gasperini, 1999).

Recent international tests conducted for Latin America also suggest that the quality of theCuban education system, at least at the primary school level, is the highest in the region. 10

The emerging gap in education does not imply that sub-par education performance is the

main cause of the poor growth performance in the region over the period 19802000, as

some authors have suggested (Birdsall & Londono, 1998). There is little conclusive

evidence that education levels across countries explain differential growth performance

(Pritchett, 2001). This is because growth depends on other factors, including an

institutional structure that provides the incentives for growth-enhancing activities and

penalizes those activities that do not contribute to social output. Education level is one of

these factors, but not necessarily the most important. The best evidence for this is the fact

that the initial level of education was similar in East Asia and Latin America in the 1970s,

yet growth rates diverged dramatically in the three subsequent decades. To take another

example, the socialist economies in the former Soviet bloc and Cuba have among the mostadvanced education systems of developing countries, yet growth rates have been slow due

to other disincentives to investment such as the absence of market competition and private

property rights. However, it is reasonable to assume that a greater coverage and quality of

education will enhance the capabilities of the poor (Sen, 1999). As such, it is important to

explain the factors underlying the persistently poor performance of the education system

in Latin America in recent decades.

3. Diagnosing Policy and Institutional Failure in Latin American Education

The most prominent diagnosis of Latin Americas poor performance involves the

identification of several sub-optimal policies and institutional arrangements. Among the

most cited problems is the inefficient use of resources. The best evidence to support this

analysis is the fact that Latin Americas poor education performance in recent decades isnot necessarily due to a lack of public spending. Moreover, the worsening in that

performance in the period 19702000 has coincided with average increasesin spending

over this period. Average education spending by central governments as a percentage of

GDP increased from 3.1% in 1980 to 3.5% in 1990, and 4.1% in 1995 and 2000.11 Other

problems identified include: inequitable access to the education system; disproportionate

spending on higher education which benefits upper-income groups; insufficient resources

spent on primary and secondary education, which would tend to benefit poorer income

groups; poor teaching; lack of incentives for efficiency; poor monitoring of quality; the

failure to set standards for student learning and evaluating performance; the absence of

authority and accountability of schools; the politicization of education ministries and

schools, where promotion is based on political criteria and not meritocracy; and highly

centralized, rigid and often antagonistic labour relations that make consensus over reform

difficult to reach (Birdsall & Londono, 1998; Lee & Barro, 2001; Kaufman & Nelson,2004c).12 However, the simple identification of sub-optimal policies and institutions (or

what I call Type I failure) is an inadequate basis for understanding the persistence of these

problems in some countries as opposed to others. Type I failure, in the first instance, could

be due to knowledge gaps or policy mistakes. The excessively high funding of higher

education (which is likely to be sub-optimal on many criteria such as efficiency, equity,

morality and so on) may be due to incorrect models on the part of decision-makers.

However, Type I failure of this sort becomes less interesting as an explanation for

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sub-optimal policies and institutions over time. As time passes, decision-makers become

aware of the sub-optimalities either through their own observation or due to the plethora ofinternational experts who continually identify the problem over the years.

Indeed, there is substantial evidence that citizens are keenly aware of the problems

facing the education system, and the deterioration in educational performance has indeed

been a major concern for citizens in Latin American countries. Opinion surveys in Latin

America (conducted by the survey firm Latinobarometro) provide an insight into the

intensity of attitudes towards the problem of education in the region. In 2000, education

was ranked as the most important problem in Venezuela, second in Argentina and Mexico.

Education consistently ranked among the three or four most important problems in the

eyes of the public in surveys conducted between 1998 and 2002 (Kaufman & Nelson,

2004, pp. 253257); but despite the extensive concern for education, there has been little

civil society pressure on government to reform education systems.

A more interesting and relevant issue is Type II failurethat is, the failure of thegovernment tocorrect or change sub-optimal policies and institutions even when there is

widespread knowledge of the problem. Type II failure is closely related to Type I failure,

but involves analysing the reasons behind the persistence of policy and institutional

failures over time.13 In explaining Type II failure, it is necessary to incorporate a historical

political economy (not merely technical) analysis since understanding institutional change

requires analysis of the interaction of economic and political processes.

The failure to change sub-optimal policies and institutions can be due to several factors:

leaders unwillingness or lack of interest in promoting or sanctioning changes; the lack of

civil society interest group pressure to demand changes; or the political resistance of

powerful interest groups who would lose privileges/entitlements as a result of proposed

changes. There are several examples of the political dynamics behind Type II failures.

These include the political resistance of middle- and upper-income groups to: (a) paying

higher fees for university education; (b) paying taxes to finance education expansion thatwould benefit the poor; or (c) supporting expenditure switching away from the costly

subsidization of higher education (which tends to benefit wealthier groups) toward

financing primary and secondary education (which tends to benefit poorer groups).14

A second example might involve the inability of poorer groups to engage in effective

collective action to demand better primary and secondary public education either because

it is too costly or because the fragmented nature of political parties in many countries

makes it difficult to aggregate interests on a regional or national level. A third reason is

that those groups with greater political voice such as upper-income groups may have exit

options to use private services in health and education, and thus may not have theincentive

to place political pressure on governments to improve the quality and coverage of public

services. This paper focuses on the second and third sources of Type II failure.

In all these cases, Type II failure needs to be explained by examining the incentives of

those with power and the structure of political competition and organization. While muchwork on poverty and aid effectiveness has focused on defining the right institutions and

the right incentives, the premise of this study is that institutions, such as property rights,

are not only an incentive structure but also simultaneously reflect power relations. For

instance, establishing rights around a fishery provides theincentives to manage the fish

stock efficiently. However, in a world of scarce resources, establishing fishing rights

simultaneouslyimparts a distributional advantage that favours those able to become the

owner of the fishery. It is thus not possible to separate issues of incentives and efficiency



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Table 3. Income inequality in Latin America, East Asia, Eastern Europe and South Africa in the 1990s

Latin America Brazil Chile Colombia Mexico Ecuador Costa Rica Peru Survey year 1996 1994 1996 1995 1995 1995 1996

lowest 20% 2.5 3.5 3.0 3.6 5.4 4.0 4.4 lowest 40% 5.5 6.6 6.6 7.2 9.4 8.8 9.1 highest 20% 63.8 61.0 60.9 58.2 49.7 51.8 51.2 highest 10% 47.6 46.1 46.1 42.8 33.8 34.7 35.4 Gini Index* 60.0 56.5 57.1 53.7 43.7 47.0 46.2

East Asia Indonesia Korea Malaysia Philippines Thailand survey year 1996 1993 1995 1997 1998 lowest 20% 8.0 7.5 4.5 5.4 6.4 lowest 40% 11.3 12.9 8.3 8.8 9.8 highest 20% 44.9 39.3 53.8 52.3 48.4 highest 10% 30.3 24.3 37.9 36.6 32.4 Gini Index* 36.5 31.6 48.5 46.2 41.4

Eastern Europe Latvia Poland Hungary Czech Republic Estonia Caribbean

Trinidad & Tobago Jamaica Dsurvey year 1998 1998 1998 1996 1998 1992 2000 lowest 20% 10.5 7.8 10 10.3 7.0 5.5 6.7 lowest 40% 23.5 20.6 24.7 24.7 18.0 7.6 17.4

highest 20% 40.3 39.7 34.4 35.9 45.1 47.9 46.0 highest 10% 25.9 24.7 20.5 22.4 29.8 31.8 27.4 gini Index* 32.4 31.6 24.4 25.4 37.6 40.3 37.9

* Perfect inequality equals 100, while equality equals 0.

Source: World Bank, World Development Report 2004; World Bank Indicators 2000.


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records in establishing broad-based education. Mariscal and Sokoloff argue that there are

several mechanisms that have led to extreme levels of inequality which tend toreduce/depress investments in schooling institutions:

First, in a setting where private schooling predominated, or where parents paid user

fees for their children, greater wealth or income inequality would tend to reduce the

fraction of the school-age population enrolledholding per capita income constant.

Second, greater inequality may also exacerbate the collective action problems

associated with the establishment and funding of universal public schools because

the distribution of benefits across the population would be significantly different

from the incidence of taxes and other costs or because population heterogeneity

makes it more difficult for communities to reach a consensus on public projects.

Where the wealthy enjoy disproportionate political power, elites could procure

private schooling for their own children and resist being taxed to underwrite orsubsidize services to others. Extreme inequality in wealth or income might also lead

to low levels of schooling on a national basis if it were associated with substantial

disparities across communities or geographic areas.

(Mariscal & Sokoloff, 2000, p. 163)

They also argue that those countries in 19th Century Latin America that were leaders

in the public provision of education and in the attainment of relatively high rates of

literacyArgentina, Costa Rica, and (to a lesser extent) Chilegenerally have relatively

less inequality in income distribution, human capital and political power (Mariscal &

Sokoloff, 2000, p. 197).16 Finally, the authors argue that a greater degree of equality leads

to the more rapid introduction of more broad-based suffrage since differential access to

the right to cast a vote is one of the most direct . . . channels through which an elite can

exercise disproportionate political influence (Mariscal & Sokoloff, 2000, p. 203).Mariscal and Sokoloff argue that the USA and Canada were clear leaders in reducing

restrictions to voting based on wealth and illiteracy and thus had much higher fractions of

their populations voting than anywhere else in the New World (Mariscal & Sokoloff,

2000, p. 203) by 1890. Moreover, the United States and Canada were about a half century

ahead of even the most democratic countries of Latin America (Uruguay, Argentina, and

Costa Rica) in the proportions of the population voting. Through 1940, the United States

and Canada routinely had proportions voting that were 50 to 100% higher than did their

most progressive neighbours to the south, three times higher than Mexico, and up to ten

times higher than in countries such as Brazil and Bolivia (Mariscal & Sokoloff, 2000, p.

203). In sum, they argue that there was at least some relationship between the extents of

literacy and the right to voteor between inequality in human capital and in political

power (Mariscal & Sokoloff, 2000).

The argument that greater inequality and restrictions on the extension of suffrage reducethe coverage and quality of education over time is an important contribution in explaining

the persistence of Latin Americas poor education record relative to North America.

However, the argument also has some important shortcomings. First, while there is a

general relationship between schooling ratios and proportions voting within Latin

America, the expansion of education in many countries such as Argentina, Norway,

Denmark and Sweden occurred well before broad movements toward democratization,

which took place in the late 19th and early 20th Centuries. In the post-1960 period, there

306 J. Di John


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are also many examples of authoritarian regimes and/or semi-democratic regimes in East

Asia (Singapore, Korea, Taiwan, China, Malaysia), Eastern Europe (the centrally plannedeconomies of the Soviet bloc) and in Latin America (Cuba, Chile) that have achieved

higher levels of education coverage and quality than democratic countries in Latin

America (e.g. Venezuela, Costa Rica, Colombia).17 In these cases, the motivations of

leaders, tax policies and the historically specific coalitions of support may matter more

than regime type. Second, in the post-1960 period, high levels of income inequality do not

preclude successful education reform and progress. Third, within Latin America there are

some important exceptions to what the Mariscal and Sokoloff model would predict. For

instance, Costa Rica has relatively low income inequality, but the distribution of education

is more skewed than in Chile, which has relatively high levels of income inequality, but

more broad access to mass secondary schooling (de Ferranti et al., 2003, p. 85). To take

another example, Malaysia, which has the highest level of income inequality in East Asia

(and a greater degree of inequality than many Latin American economies), has highercoverage than most Latin American economies and outperforms all the Latin American

economies that participate in international tests. The case of Mexico, which has among the

highest levels of income inequality in Latin America, also challenges the Mariscal and

Sokoloff model. As mentioned above, in the 2002 PISA international test for 15-year-olds,

Mexico had the lowest proportion of students of any of the Latin American country scoring

at the lowest levels of proficiency and had the second highest proportion of students

(behind Argentina) scoring at the two highest levels of proficiency.18

From a different perspective, Birdsall & Londono (1998) argue that high income

inequality affects both the demand for and supply of education. On the demand side there

are two relevant factors. First, higher income inequality implies that more households are

likely to be liquidity-constrained, unable to borrow and/or lacking the resources necessary

to keep their children in school.19 Second, and more controversially, Latin Americas

larger endowment of natural resources has historically limited societys demand foreducation. This is because the prevalence of large-scale plantation agriculture and mineral

resource extraction involves relatively few owners of capital and relies generally on large

quantities of unskilled labour (Engerman & Sokoloff, 1997). This factor may limit the

demand for education relative to countries in East and South East Asia, for example, where

more labour-intensive manufacturing production and exports, which require a higher

proportion of skilled workers, are more dominant.20

Birdsall & Londono (1998, p. 125) argue that the supply of education might also be

affected by income inequality. In more unequal societies, there are a greater number of

poor households for a given level of income, which implies that subsidized basic education

is likely to be greater than in more equal societies. As a result, the tax burden on upper-

income groups will have to be larger to finance the education of a greater number of

children from poor households. Upper-income groups are likely to resist this larger tax in

more unequal societies and demand the subsidization of higher education. Evidence of thisis provided by the authors, who point out that in the period 1990 94 the average

budget allocated to higher education as a percentage of the overall education budget was

23% in Latin America compared with 15% in East Asia, as indicated in Table 4.

While the budget allocation to higher education of Latin American countries (in the

sample Birsdall and Londono provide) is on average higher than in East Asia, the

relationship between the level of inequality and the share of public funding of higher

education is far from straightforward. Within Latin America, Mexico and Colombia have



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much smaller shares of budget allocation to higher education than Costa Rica, Uruguay

and Argentina, despite the fact that the two former countries have much higher levels of

income inequality than the latter three countries. Indeed, Mexico has a smaller share of

budget allocation to higher education than Malaysia despite income distribution beingmore unequal in Mexico. In sum, while the example of Cuba (the most egalitarian country

in Latin America in terms of income distribution) supports the hypothesis that more equal

income distribution is better for education coverage and performance, the existence of

important cases that contradict the hypothesis that inequality leads to poorer education

coverage and quality suggests that it is necessary to include other factors beyond income

inequality and regime type in explaining cross-country differences in education

performance.

4. The Dynamics of Exit and Voice in Latin American Education

This section considers three factorspolicy-induced supply of private education, personal

income tax collection and the nature of political partiesthat are central to understanding

the extent to which exit and voice are more likely to be utilized in the context of poorly

performing public education. I propose that an application of Albert Hirschmans exit-

voice framework provides a useful starting point for an alternative explanation of the

persistence of sub-optimal performance in education in Latin America. Hirschman (1970)

argued that the greater use of exit options could atrophy the development of voice, that is,

protest mechanisms. The logic of his framework is as follows: consumers or members of

organizations have competing responses to their perceptions concerning the deterioration

in the quality of the goods they buy or the services they receive. Consumers exit when theyjudge that another firm or organization provides a better good or service. The exit option is

viable when the alternative/substitute good or service is available at an affordable price.

Indirectly and unintentionally exit can cause the deteriorating organization to improve its

performance. This is a general description of how market competition promotes

economic efficiency. Exit options provide a disciplinary mechanism for managers/owners

to provide the best quality goods and services at the lowest cost given available

technology. In a dynamic sense, market competition forces organizations to innovate or

Table 4. Budget allocation to higher education, 199094 (as percent of overall education budget)

East Asia Latin America

Malaysia 17 Argentina 17Thailand 17 Brazil 26Indonesia 18 Chile 20Korea, Rep. 8 Colombia 17Simple average 15 Costa Rica 31

Ecuador 24Mexico 14Uruguay 25Venezuela 35

Simple average 23

Source: Birdsall and Londono (1998: Table 4, p. 127).

308 J. Di John


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perish, thus providing the incentive structure for firms to improve productivity and

innovate over time.21

Voice, on the other hand, is the act of complaining or of organizing to complain or to

protest with the goal of directly forcing managers to improve the quality of an

organization whose performance has deteriorated. The main point of the framework is to

suggest that there is no pre-established harmony between exit and voice. Instead, the two

mechanisms often work at cross-purposes and tend to undermine each other. In

particular, exit options tend to undermine the use of voice. Easy availability of exit was

shown by Hirschman to be detrimental to the use of voice. The principal reason for this

is that, in comparison to exit, voice is more costly in terms of time, effort and resources.

This is because effective voice requires collective action, which is subject to the well-

known difficulties of organization, representation and free-riding (Olson, 1965). Exit, in

contrast, does not require collective action and co-ordination with other agents. Hence,

the presence of the exit alternative can atrophy the development of the art of voice(Hirschman, 1970, p. 43).

The incentives of upper-income groups to exercise their considerable influencing

capacities or voice in public education (and other public services) are not examined

systematically in the literature. Two variables are likely to affect such incentives. The first

is the availability of private education, which provides an exit option for using public

schools. The second is the extent to which upper-income groups actually pay direct taxes

in the form of personal income and property tax. Relatively high levels of direct tax

collection require substantial co-ordination and co-operation between the state and upper-

income groups, and thus reflects a high degree ofbargainingbetween the state and upper-

income groups about why the taxes are collected and for what purpose (Lieberman, 2002,

pp. 99100). As a result, the absence of such taxes in the tax composition of a country

(whether because upper-income groups evade such taxes or resist laws to increase them)

would tend to reduce the incentives of upper-income groups to exercise voice over howpublic spending is undertaken. I consider each of these factors from the point of view of

the exit-voice framework.

Finally, the nature of political parties and political competition is central to the

construction of an aggregate voice for those households who cannot afford to exit the

public education system. It is argued that the existence of centralized, well-disciplined

parties with a reputation for promoting broad-based public services is crucial in two ways.

First, political parties are one of the few institutions that can aggregate the voice of the

poor. Second, the effectiveness of such parties in the electoral arena provides an important

counter to the loss of powerful voices that results from the exit of wealthier households

from public education.

4.1 Private Enrolment in Comparative Perspective

Let us first consider the availability of private education. The exit option of better quality

private education would, other things being equal, tend to make richer groups opt out of a

poorly performing public education system;22 and indeed, we do see a difference in the

share of private enrolment in total enrolment between Latin America, on the one hand, and

East Asia, Eastern Europe and South Africa, on the other hand, as indicated in Table 5.

In the period 19802001, the share ofprivateenrolment in primary education in Latin

America averaged 15% compared to an average of 5% in East Asia, 2% in South Africa



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Table 5. Private enrolment in education: Latin America, East Asia, South Africa and Eastern Europe compared (private enrolment enrolment)

Primary School Secondary Scho

Latin America 1980 1985 1990 1996 2001 1980 1985 1990

Average 13 14 15 17 17 25 25 24 Argentina 18 19 19 20 20 39 30 29 Bolivia 8 8 10 na 21 17 na 26 Brazil 13 12 14 11 8 na na na Chile 20 32 39 42 38 24 39 42 Colombia 14 13 15 19 19 45 42 39 Costa Rica 3 3 5 5 7 9 9 10 Eucador 16 16 na 18 27 34 34 na Mexico 5 5 6 6 8 19 12 12 Peru 13 14 12 12 14 15 15 14 Uruguay 16 15 16 16 13 17 15 17 Venezuela 13 13 14 18 14 26 25 29

Primary School Secondary School

1998 2001 1998 2001Caribbean

Trinidad & Tobago 5 6 8 18Jamaica na 5 na 3Dominican Republic 12 14 32 23

Primary School Secondary Scho

East Asia 1980 1985 1990 1996 2001 1980 1985 1990 Average 6 6 3 4 6 26 17 15 Indonesia 21 17 na na 16 49 na na Korea 1 1 1 2 1 46 39 41 Malaysia na na 0 1 4 na 8 4 Philippines 5 6 7 7 7 48 41 36 Thailand 8 9 10 13 14 13 12 10 China 0 0 0 0 0 0 0 0 Vietnam 0 0 0 0 0


18/34

South Africa na 0 1 1 2 na 1 1 Primary School Secondary School

Eastern Europe 1998 2001 1998 2001Average 2 2 3 4Latvia 1 1 1 1Estonia 1 2 1 2Poland 1 5Hungary 5 5 6 6Czech Republic 1 1 6 7

Source: UNESCO, World Education Report (1991, 1993, 1995, 1998 and 2000) and EFA Global Monitoring Report 2005.

Table 5. Continued


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and 2% in the transition economies of Eastern Europe. Interestingly, Mexico and South

Africa, both of which have among the worlds most unequal income distributions, hadrelatively low private enrolment over this period. This indicates that greater income

inequality alone does not determine the extent to which private education at the secondary

level is either demanded or supplied.

The situation is somewhat different for secondary education, though again the share

of private enrolment is on average higher in Latin America. Although both regions had

a similar share of private enrolment in 1980, in the period 19852001 the share of

private enrolment in secondary education averaged 23% in Latin America compared to

the East Asian average of 16%. There were, however, substantial variations within each

region. Brazil, Peru, Mexico, Costa Rica and Uruguay were well below their regional

averages, while Indonesia, South Korea and the Philippines were substantially above

their regional average, and indeed above the Latin American average. Again, South

Africa had negligible private enrolment in secondary education, and the transitioneconomies in the sample had very low levels of private enrolment in secondary

education. Cuba, as mentioned, has 100% enrolment in public schools at all levels of

education23.

There are at least two factors that may explain the greater supply of private education

(particularly at the primary school level) in Latin America. First, some countries such as

Argentina and especially Chile provide extensive subsidies to private schools. Not

surprisingly, the share of private enrolment is higher than the Latin American average in

these countries (Somerset al., 2004, p. 49). Second, schools run by the Catholic Church

in Latin America are widespread (UNESCO, 2004, p. 97), which contributes to the

increased supply of non-state schools.

It is important to note that the supply of private education is not simply an

exogenous variable. It may well be the case that parents choose to opt out of sending

their children to public schools because of the poor quality of such schools. While itis beyond the scope of the paper to consider this issue in depth, it seems reasonable to

posit that the policy of providing state funding to private schools and the historical

availability of state-funded Catholic schools lowers the cost of exitto private schools.

It is plausible to assume that, in low- and even middle-income countries, higher levels

of income inequality should limit the exit option for households wishing to send

their children to private schools, unless there is state subsidization of private education

either through direct subsidies to non-state schools or indirectly through state-financed

voucher schemes. Given the higher average level of private enrolment in Latin

America, and given the fact that the region, on average, has much higher inequality

than in other regions with similar levels of income per capita, it is reasonable to assert

that state funding of higher education is higher in Latin America than in other middle-

income regions. Indeed, of the Latin American countries with the highest degree of

income inequality (Brazil, Chile, Mexico and Colombia), only Chile is above theLatin American average in terms of private enrolment. Chile is also the country with

the most expensive voucher programme in the region (see Tables 2 and 4). Whatever

the reasons behind greater enrolment in private sector education (and here more

systematic research on the public policies that affect such enrolment decisions is

needed24), the consequences of such large-scale exit from the public education

system are relevant for understanding obstacles to reform in contemporary Latin

America.

312 J. Di John


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4.2 Personal Income Taxation in Comparative Perspective

The second factor that influences the extent to which the voice of upper-income groups is

exercised involves the level and structure of taxes. Taxation is the nexus that binds state to

citizen and in particular creates mutual obligations between government leaders and

interest groups. Greater internal tax collection would tend to increase the legitimate

demands citizens make on the state. In poor countries, the poor contribute a negligible

amount to direct taxation given their low incomes and the fact that many work in the

informal sector and subsistence agriculture. However, the greater the extent to which

upper-income groups contribute to direct taxes (in the form of personal income and

corporate tax) the more likely it becomes that such groups will use greater voice. This is

because they have a more direct stake in how public resources are spent.

There have been very few systematic comparisons of the composition of tax across

developing regions. The capacity of states to collect direct taxes (income and property

taxes) provides an important insight into their power and legitimacy vis-a-vis upper-income and middle-class groups (Lieberman, 2001). The share of income tax in total tax

collection differs substantially between Latin America and the other middle-income

regions, namely East Asia, Eastern Europe, South Africa, and some countries in the

English-speaking Caribbean. Consider the differences that emerged in the period

19972002 between Latin American and other middle-income economies in terms of the

share of direct taxes collected as a percentage of GDP. In the period 19972002, personal

income and property tax collection in East Asia was, on average, four times higher as a

proportion of national income than in Latin America, as indicated in Table 6.

This significant difference in personal income tax collection in 1997 is notdue to any

substantial differences in income per capita across the regions.25 The share of personal

income and property tax as a percentage of GDP was over five times higher in the English-speaking Caribbean,26 over six times higher in Eastern Europe, and was over 12 times

higher in South Africa, all compared with Latin Americas average.27 In the period198588, the share of personal income and property tax as a percentage of GDP was

nearly double in East Asia compared to Latin America. It is interesting to note that in the

period 197578 and 198588, Mexico and Costa Rica had among the highest shares of

personal income and property tax in the region (Table 5).28 These are also the two

countries that had the lowest share of enrolment in private primary and secondary school

education (Table 5). In terms of education performance, Costa Rica had among the lowestlevels of illiteracy in the region, and 15-year-old students from Mexico were amongst the two

best performers in the 2002 PISA exam.

When one expands the category of direct taxes to include corporate income tax, East

Asia still collected over 75% more as a percentage of GDP in the period 19972002 (Di

John, 2006, Table 3, p. 14). The Eastern European and the English-speaking Caribbean

economies had more than doublethe income tax collection as a share of GDP compared

with Latin America over the same period (Di John, 2006).

The lower levels of income tax collection have meant that the burden of structural

change in tax falls relatively more on indirect taxes in Latin America than in East Asia, or

Eastern Europe, particularly in the period 19972002 (Di John, 2006, Table 4, p. 15). 29

Most relevant for our discussion, the low direct tax payment of upper-income groups

means that they have less direct interest in exercising their voice toward the state and/or

toward influencing the platforms of political parties with respect to the issue of the quality



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and coverage of provision of public education (and other) services. Moreover, the low

level of direct tax (combined with the very high incomes upper-income groups earn in

many Latin American countries) means that these groups have substantial disposable

income to finance private education for their children. This expands further the exit

options of wealthier groups and reduces their incentive to use the art of voice.

4.3 The Nature of Political Parties in Comparative Perspective

A third factor that would affect the persistence of Type II failure in education policies is

the nature of political competition and the structure of political parties. The nature and

organization of political competition affect the extent to which political leaders and

policy-makers are pressed to improve public education delivery. For example, if poor

people are organized around fragmented, local and personalized interests, they are

unlikely to make their numbers count in electoral terms, or to get political parties

interested in pursuing issues of concern to them.30 The exit of upper-income groups from

Table 6. Personal income and property tax burden: East Asia, Latin America, South Africa

and Eastern Europe compared (Ratio of Personal Income and Property Tax as a percent ofGDP, %)

197578 198588 19972002 2000 GDP per capitaLatin America (2000 US$)

Average 1.7 1.2 1.0 $4,399Argentina 0.4 0.8 1.1 7,726Brazil 0.2 0.2 1.4 3,537Chile 3.3 1.1 na 4,964Colombia 1.8 1.6 0.6 1,979Costa Rica 2.9 2.2 0.7 4,185Mexico 2.7 2.0 na 5,935Peru 1.5 na 1.5 2,046Venezuela 1.0 1.0 1.0 4,818CaribbeanTrinidad & Tobago 2.6 6.6 5.4 6,326Jamaica 5.4 5.5 2,873Dominican Republic 1.1 1.1 1.8 2,414East Asia Average 1.8 2.3 3.9 3,716Indonesia 0.8 0.9 3.5 800Korea 1.9 2.8 3.6 10,890Malaysia 2.1 2.4 6.1 3,881Philippines 1.6 1.1 2.6 990Thailand 1.1 1.9 2.2 2,020Taiwan 3.4 4.5 5.2South Africa 6.1 7.7 12.9 3,019Eastern Europe Average 6.8 4,327Latvia 6.5 3,259Estonia 7.7 3,987Poland 6.7 4,309

Hungary 7.8 4,656Czech Republic 5.2 5,422

Source: IMF Government Financial Statistics and International Financial Statistics, IMF;Statistical Yearbook of the Republic of China 2002 for Taiwan.

314 J. Di John


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public education would not be so damaging to the monitoring capacity of civil society if

those that remained in public schools had the political capacity to pressure governments toreform if teaching quality declines.

The political capacity of the lower-income groups to monitor public education is greatly

enhanced by the presence of well-established, institutionalized and broad-based political

parties. In many countries, however, political parties are often fragmented and organized

through clientelist networks. As Keefer & Khemani (2005, p. 12) argue:

Politics characterized by patronclient relations tend to produce an oversupply of

tangible, targeted benefits to supporters such as state employment, buildings and

roads. Narrowly targeted goods can be provided to individuals and small groups and

therefore are seen as clear evidence of political patrons fulfilling their promises to

clients. Universal access to education is not easily targeted and improvements in

quality are also difficult to target, both because they tend to involve managerialimprovements that spread throughout the system and because they are difficult for

voters to attribute to politicians. For example, if teacher quality or attendance has

improved, voters cannot distinguish whether that happened because the teacher

decided to do a better job, because of a generalized reform in teacher quality that is

affecting all teachers, or because of the targeted intervention of a particular

politician.

Also because of the unstable and fluid nature of many clientelist polities, the time

horizon of many politicians is short-term:

Promises that concern jobs or public works can be fulfilled relatively rapidly.

However, political competitors with short time horizons are unable to credibly

promise to implement projects that have a longer time horizon in achieving

improvements such as in education.

(Keefer & Khemani, 2005, p. 13)

As a result, politicians in clientelist parties and polities are less likely to find that long-term

reform initiatives will generate political dividends to the extent that short-term measures

do. Where political parties are well established, institutionalized, with a broad-base of

support and have a reputation for promoting welfarist policies, there are stronger

incentives for politicians to adopt longer time horizons and a more encompassing (as

opposed to more targeted) approach to social service provision and monitoring.

The Colombian case reveals some important obstacles to pro-poor educational reform

that political party clientelism and fragmentation have generated. Despite important

initiatives to reform the Colombian education system, in particular through decentraliza-

tion of service delivery and the promotion of school autonomy in the period 1991 2005,

reform initiatives have generally failed to improve the quality of public education (Duarte,

1998; Lowden, 2004).The clientelist and fragmented nature of the party system has been identified by political

analysts as the main reason behind this failure (Duarte, 1998; Lowden, 2004).

The spending of education resources and hiring of staff continue to be used as principal

tools of political patronage, with resources devoted to quality improvements largely

absent. Regional parties control the key positions in the regional education system

(Duarte, 1998, pp. 140142). The weakness of the legislature in enacting reforms is due to

the internal fragmentation and clientelism of the party system, and in particular of the



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Liberal party (Archer & Shugart, 1997). The electoral system used in the Congress is

historically based on accommodating the countrys powerful but decentralized regionalelites (Archer & Shugart, 1997). This makes building coalitions around large-scale

reforms in education difficult. The highly fragmented nature of the party system at both

national and regional levels and the high degree of competition among political groups to

obtain key positions in the departmental and municipal administration are also behind the

high turnover among the directors and senior staff of both national and municipal

educational institutions (Archer & Shugart, 1997).

There is some evidence that the degree of political party centralization seems to be an

important feature of relatively successful education performance in democratic regimes.

Malaysia, Sri Lanka and the state of Kerala in India all have education indicators that

are greater than would be expected for their per capita income (Dreze & Sen, 1989,

pp. 226 253). In contrast to Colombia, each of these countries/states also possesses

relatively centralized political party structures that effectively aggregate the voice of theless wealthy segments of the population.31 The extent to which political parties can

represent the voice of the less privileged sectors of society seems to be a central element

in compensating for the damaging effects that exit by wealthier parents can have on

public education systems.

5. Accounting for Variations in Public Sector Education within Latin America

The variations in education performance within Latin America are reasonably consistent

with the proposed framework. Cuba, the best performer, has no private enrolment and has

a centralized, well-disciplined party whose legitimacy is derived, in part, from the

provision of broad-based, quality public education and health. It derives all of its

taxation or revenues by direct means by appropriating the surplus created by workers in

public enterprises (as did the Soviet Union). Apart from Cuba, three of the next bestperformers are Chile, Mexico and Costa Rica. The latter two countries have relatively low

private enrolment rates (and by implication relatively low levels of state funding of non-

state education), relatively high direct taxation and well-developed political parties. For

these two countries, faring well on all of these three factors contributes substantially to

providing the incentives for the powerful effectively to exercise voice in how public

education is provided. There is no case of a country in the region that performs well in

public education that is lacking in all three categories.

It is important to stress, however, that the nature of political parties within Latin

America is also central in explaining why high levels of private enrolment are not

necessarily detrimental to public education performance. In this perspective, the relatively

good performance of the Chilean education system (withinLatin America) merits further

discussion. On the one hand, the Chilean case seems at odds with the explanation put

forward since private enrolment rates are the highest in the region at the primary andsecondary school level. However, as emphasized earlier, the extent to which political

parties can represent the voice of the less privileged sectors of society (and demand,

more generally, state provision of social services) seems central to compensating for the

damaging effects that exit by wealthier parents can have on public education systems.

Indeed, the Chilean polity has been characterized by strong, centralized political party

pressure and civil society demands for state welfare provision, even during its

authoritarian period under the Pinochet regime (Dreze & Sen, 1989, pp. 229239). It is

316 J. Di John


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important to note that Chile is the onlycountry with high levels of private enrolmentand

low personal income tax (in more recent years) that has had relatively good educationindicators in regional (if not international) terms.

Low levels of personal income tax were not, however, always a feature of the Chilean

tax system. In the 1970s, Chile in fact had the highestrate of personal income tax in the

region (see Table 6), which is consistent with the social welfarist nature of its party system.

While tax policy reforms under Pinochet led to substantial reductions in the income tax

share (as happened throughout the region in the 1980s and 1990s), the legacy of welfarist

parties and the ethos of social service provision have survived in Chile, as Dre ze and Sen

argue. Overall, the countries with the highest personal income tax in the 1970s were

precisely Chile, Mexico and Costa Rica (see Table 6), all of which have maintained

relatively centralized, social democratic-dominant political parties.32 These are also the

three countries (Cuba aside) that have had relatively good education performance within

Latin America. The Cuban case, as mentioned, further supports the hypothesis that strong,centralized parties make a difference to social service provision within the Latin American

context.

Relatively poor education performance in Brazil is also reasonably consistent with the

argument put forward. In the periods 1975 78 and 1985 88, Brazil had one of thelowest

shares of personal income tax in the region, with its share increasing to just slightly above

the Latin American average in the period 19972002.33 Private enrolment rates were

similar to the Latin American average in primary education over the periods analysed but

still double the rate of Mexico and Costa Rica. An important question is why more

households did not exit the public school system. The sustained relatively low private

enrolment rates in Brazil may be explained by two factors: first, the very unequal pattern of

income distribution means that the number of households who can afford private

education is limited; and second, there was no state provision of vouchers, as in Chile, to

finance moves to private schools (see discussion of Chilean voucher system later).As mentioned earlier, of the four Latin American countries in the sample with the greatest

degree of inequality, only Chile has private enrolment rates above the Latin American

average, and this is because Chile has an extensive voucher scheme. What is important in

countries with very unequal distributions of income is that the top 10% of income earners

appropriate well over 50% of national income (Table 3). To the extent that wealthier

households are more influential and exercise their voice on an individual basis, and to the

extent that there are fewer such households the more unequal the income distribution, even

a relatively small level of household exit from the public education system can result in a

significant loss of powerful voices.

Nevertheless, it is still necessary to explain why the public education system has not

been forced to reform. Here, the role of political party structure becomes important. In

terms of political party structure, the Brazilian polity is characterized byregionally based,

fragmentedand clientelist political parties that make aggregating voice among the lessprivileged a difficult task (Lieberman, 2001). Given the extraordinary economic and

political power of upper-income groups in Brazil (due to their ability to avoid direct,

progressive taxes and their ability to appropriate among the highest shares of national

income, as reflected in the country having one of the highest levels of income inequality in

the region), the absence of well-disciplined, centralized political parties appears

fundamental to understanding the lack of civil society pressure to reform the public

education system (Draibe, 2004). The fragmented and clientelist nature of the party system



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probably explains why there were no collective societal actors of national scope able to

present a coherent reform agenda (Draibe, 2004, p. 384). While there is some evidencethat exit by upper- and middle-class families was occurring in the 1970s (Draibe, 2004),

the evidence on Brazil suggests that poorly organized voice has probably been as

important, if not more so, than exit by the middle classes in explaining lagging public

education coverage and quality.

With respect to political party structures, the Mexican case also warrants a brief

explanation. It is true that the Mexican political party system historically has been

clientelist (see Craig & Cornelius, 1995). In the Colombian case, for example, it was

argued that a clientelist party system negatively affected public education performance

because the voice of the less privileged was more difficult to aggregate. However, it is

important to distinguish betweentypesof patronclient relations. The hegemonic party in

Mexico for most of the 20th Century, the Partido Revolucionario Institucional(PRI), has

been very centralized and well disciplined in the context of a system that imparts strongpresidential powers (Weldon, 1997). The PRI in Mexico was noted for being a clientelist

party, but unlike the Colombian case, the party structure was very centralized, which

makes aggregating interests less of a problem. Moreover, the PRI derived much of its

legitimacy from supporting broad-based public service provision.

If one compares Chile and Mexico, the former has high private enrolment, but a history

of welfarist political parties, while the latter has low private enrolment but a more

sustained income tax effort and a historically dominant centralized (if clientelist) political

party.34 The performance of students in both countries is similar in international tests, with

Mexico performing a bit better. The key point here is that all three factors (income tax,

private enrolment, and the nature and structure of political parties) can make a difference;

and in the Latin American context, the nature of political parties proves pivotal in

overcoming the exit-inducing effect of high private enrolment, as the Chilean case

suggests.I have presented a very rudimentary discussion of the nature of Latin American political

parties. A more detailed account of the nature of political party systems and their effects on

mobilizing the voice of less privileged groups and classes would be required to improve

our understanding of public education coverage and quality within Latin America. One

important cause for concern, however, is the recent emergence of anti-party discourses and

the rise of political outsiders, particularly (but not exclusively) in the Andean region (see

Roberts, 1996). Such anti-party discourses and governance patterns do not augur well for

the possibilities of (re)constructing progressive and institutionalized political parties that

have been central to the formation of effective welfare states (Baldwin, 1990; Hicks, 1999;

Judt, 2005, pp. 7277, 360373).

6. Policy Implications

In light of the three factors presented above, it is not surprising that there have been few

demands from the wealthier and more powerful segments of civil society in pushing

educational reform in Latin America. Reform initiatives have been mostlystate-ledaffairs

spearheaded either by presidents or by small teams of bureaucrats in the education and

planning ministries and by initiatives taken by international financial institutions such as

the World Bank and Inter-American Development Bank. Tellingly, political parties,

labour unions, business chambers and other interest groups have played a negligible role

318 J. Di John


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within Latin American countries in putting pressure on governments to improve the

quality and coverage of education at the primary and secondary level (Kaufman & Nelson,2004c).35 This provides some corroboration for our emphasis on the absence of effective

political party structures in aggregating the voice mechanisms of the poor in Latin

America. In essence, reforms have been more supply-led by states rather than demand-led

by interest groups in civil society. Applying Hirschmans exit-voice framework in the

Latin American context where private education options are relatively high and where

upper-income groups do not pay high levels of direct taxation sheds light on the weakness

of interest group pressure within Latin America to push for education reforms which, in

turn, contributes to the persistence of deteriorating public education quality and coverage

in many countries in the region.

In considering the coverage and quality of education, the most successful middle-

income countries are in Eastern Europe, East Asia, Cuba, and in the former British

colonies of Trinidad and Tobago, and Jamaica (at least insofar as those two have a netenrolment in secondary education well above what would be predicted based on their

income per capita). In most of these cases, the rate of private enrolment in primary

education is relatively low, the rate of direct taxation is relatively high, and political party

structures do not suffer from severe fragmentation.

The exit-voice framework also may shed some light on why the introduction of voucher

schemes to promote private education might limit the performance of state education.

The basic premise of voucher schemes is that providing choice to parents increases

competition into the education market, and thus incentives to managers of schools to

improve their service or face declining enrolment. However, a problem with such schemes

is that the very poorest are unlikely to be able to afford to take advantage of them.

Therefore, the introduction of vouchers does not eliminate public education, but reduces

its share in total enrolment.

Chile provides an interesting and important case in that there has been extensive use ofvouchers to subsidize private education since 1980. The Chilean policy of vouchers,

implemented by the military regime in 1980, provided for fully subsidized deregulated

private schools, which competed for pupils with deregulated public schools in all

metropolitan neighbourhoods (Carnoy, 1997, p. 107). This is the main reason why Chile

has the highest rate of private enrolment at the primary and secondary school level in Latin

America (Table 4).

The record of Chiles experience with the widespread use of vouchers, however, is far

from encouraging. The results have been summarized by Carnoy (1997, pp. 107111) as

follows:

(1) Total spending in education fell in the 1980s with the federal share of spending

falling to 80 percent in 1985 and 68 percent in 1990. Middle and upper-income

groups made up the shortfall in spending in two ways: first, more prosperous

districts were able to spend more on public schools than were poorer areas;

second, parents in wealthier areas whose children attended private schools

could supplement their vouchers with higher add-on fees than could parents in

poorer districts.

(2) Higher-income families were more likely to use the vouchers for private

schools. In 1990, 72 percent of the families in the lowest 40 percent of the

income distribution attended public schools. Among the next-highest 40



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percent, 51 percent of families sent their children to public schools (and 43

percent to subsidized private schools). Of the families in the top 20 percent ofthe income distribution, only 25 percent sent their children to public schools, 32

percent used subsidized private schools, and 43 percent sent their children to

(non-voucher) private schools.

(3) There was no improvement in student achievement. In national standardized

tests, Spanish and mathematics scores for fourth-graders fell between 1982 and

1985. Students in lower-income public schools recorded the sharpest decline

in test scores, but students in lower-income subsidized private schools also fell

[italics added]. Students in the middle-socioeconomic level schools had small

increases in test scores, whether they were in public or subsidized private

schools. By 1992, scores had recovered to the levels of 1980.

(4) There is also evidence of widening inequality in the education system. Urban

rural gaps increased, and the gap between high- and low-income studentswidened in terms of tests scores without increasing the overall level of

academic achievement.

The Chilean experience suggests that increasing private sector options for education was

disappointing because only the better off segments of the population benefited from

voucher schemes. Private sector schools perform better than public schools in Chile not

because of any inherent governance advantages of private school management; rather,

private schools succeed on average by administering more selective admissions tests and

by skimming the most able and privileged students (Somers et al., 2004, pp. 6069).

However, it is also possible that subsidizing private education induces an exit of better

off and able students, which denies those left in public schools the experience of positive

peer pressure and the voice mechanisms that wealthier parents seem to exercise to a

greater extent than poorer ones. Moreover, the policy of subsidizing private education on a

large scale sends a signal that public education should be avoided if possible. This not onlyfurther induces exit by those middle-class parents who can afford to benefit from such

policies, but also sends a demoralizing signal to those working in the public educationsector that their work is not valued as much as that of private sector teachers. Comparative

evidence suggests that Chile would perform better by limiting exit options to private

schools because of the well-developed welfarist traditions of its political parties.

It is important to note that there are severe data limitations in making cross-country

comparisons in education quality, since very few developing countries (excluding most in

Latin America) participate in internationally administered tests. Moreover, there is no

systematic cross-country evidence that disaggregates the respective performance of public

and private school students. Such disaggregation would enable a further testing of the

framework presented. One clear policy implication is that education ministries in less-

developed countries should plan to have students participate in such exams. This will

enable countries to monitor their progress and will facilitate much richer comparative and

historical analysis.

7. Conclusion

This paper draws on the insights of Albert Hirschmans exit-voice framework and attempts

to make a small contribution to the vast literature on the political economy of public

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education performance and reform. It is argued that the combination of low direct taxation

and high levels of private primary enrolment provides exit options for the wealthy andreduces their incentive to exercise voice in the face of poor education performance.

Moreover, fragmented and clientelist political party structures limit the provision and

monitoring of public education, and thus reduce the political capacity of the poor to

exercise their voice regarding public education coverage and quality. The combination of

these factors implies the challenges for reforming public education are formidable in many

countries in Latin America. This paper also contributes by bringing together disparate

literature on the political economy of education reform, tax data and the nature of political

parties to highlight important regional differences between Latin America and more

successful education performance in other middle-income regions.

The broad cross-regionaldata do seem to support the case that relatively high personal

income tax shares and relatively low private enrolment rates (particularly in primary

education) matter a great deal in explaining differences in education performance (withouta broader discussion of comparative political party structures across the regions).

The evidence suggests that political party structure matters for variations within Latin

America. This may very well be because the very unequal income distribution in the

region puts pressure on the attainment of quality publiceducation, which in turn requires

vigilant civil society and political party pressure in many countries.

One South East Asian country with Latin American levels of inequality, Malaysia,

has overcome this problem with a centralized political party, the United Malays National

Organization (UMNO), the dominant member of the National Barisan coalition, whose

political legitimacy is derived from providing education, investment and employment

opportunities to underprivileged Malays.36 As the dominant political party in Malaysia, it

is also responsible for extracting relatively high levels of progressive personal income tax

collection. The existence of high levels of inequality cannot, on its own, explain poor

public education performance, but it does present significant political, fiscal andinstitutional challenges. The fact that Latin America has a much longer tradition of

electoral politics in the 20th Century than either East Asia or Eastern Europe makes the

issue of comparative political party structures less salient for cross-regional comparisons,

though such comparisons will become more relevant to the extent that competitive party

politics is consolidated across the developing world.37 A greater understanding of the

social basis of support and legitimacy in either less democratic regimes (Cuba) or in

younger democracies (East Asia and the ex-Socialist, transition economies in Eastern

Europe) would be required to explain more fully why such states have been more effective

in providing more broad-based quality public education than in Latin American polities.

I have also highlighted that unfavourable initial conditions (such as unequal income

distributionand lowper capita incomelevels) are not impossible to overcome. Countries such

as Malaysia, Korea, Cuba, the state of Kerala in India and, much earlier, the socialist

economies of the former Soviet Union have transformed once poorly performing educationsystems. However, these cases also highlight that capacity building is not simply a technical

issue but involves changes in political balances and strategies and changes in the ideas and

policies of ruling coalitions. In historical perspective, the legacy of socialism and British

colonialism seems to have been important in providing both the institutions and the

motivations for broad-based education systems, at least in the countries in the sample.

The big picture that emerges is that when economic e lites are forced to pay income

taxes, where state-funding for private education is relatively low, and where there are



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effective political parties with a reputation for promoting broad-based public education,

aggregate education performance in a country is likely to be better. In Latin America, aserious concern emerges. That is, state funding of private education through subsidization

of private and religious schools creates a much higher supply of and demand for non-state

education than would exist given the regions high level of income inequality. This is

because the median household would be unable to afford non-state schools in the absence

of such subsidies. Such policies create opportunities for the middle classes (but not the

poor, a significantly larger group) to exit the public education system. Moreover, state

revenue in the region is increasingly financed not by progressive income taxes, but by

neutral and often regressive indirect taxes (particularly value-added taxes).38

The combination of these policies not only reduces the use of voice by such groups, but

also exacerbates further the inequalities within the region. Finally, the clientelist,

fragmented and often populist nature of many political parties in the region means that

countering such inequities is all the more difficult.The exit-voice framework, applied to the context of substantial and durable inequalities

in economic and political power across income groups and classes, has other important

policy implications. Good government depends in part on the incentives of elites and the

pressures they put on public agencies to deliver services. The good governance literature

(e.g. World Development Report, 1997, 2002 (World Bank, 1997, 2002)) stresses the

importance of building civil society demands without analysing how the structure of

power and voice, and conflicts of interestwithin civil society affect the actual political

pressures that state institutions face. The problems of education performance are not

primarily technical but have more to do with historical political economy factors

underlying the exit to private education among wealthier groups, the inability of states in

Latin America to collect direct income taxes from those same groups and the inability of

many political parties to monitor poor public education coverage and quality. This

analysis also suggests that improving income distribution without addressing the otherfactors that influence the structure of voice may not necessarily improve education

coverage and quality. There is wide variationof income distribution within Latin America

that coincides with relatively similar outcomes in terms of education coverage and quality.

Unless greater attention is paid to the political economy of exit-voice dynamics, it is

unlikely that reform initiatives in education will a

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Exit Voice