Hirschman's exit-voice framework and Latin American education

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Albert Hirschman's Exit-voice Framework and its Relevance to Problems of Public Education Performance in Latin America
Jonathan 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 Public Education Performance in Latin America, Oxford Development Studies, 35:3, 295-327 To link to this article: http://dx.doi.org/10.1080/13600810701514860
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Oxford Development Studies, Vol. 35, No. 3, September 2007
Albert Hirschmans Exit-voice Framework and its Relevance to Problems of Public Education Performance in Latin America
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JONATHAN DI JOHN*
ABSTRACT This paper applies Albert Hirschmans exit-voice framework to the problems of education coverage and quality in Latin America. It argues that the combination of low direct taxation and high levels of private primary enrolment provides exit options for the wealthy and reduces 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 poor to exercise their voice regarding public education coverage and quality. The main policy implication of the paper is that good governance in education cannot realistically be addressed without analysing how the structure of power and voice, and of conicts of interest within civil society, affect the actual political pressures that state institutions face.
1. Introduction In the period 1970 2000, 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 the country 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 rst focuses on the identication of a series of sub-optimal policies and institutions that result in inefciencies 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 & o, 1998; Mariscal & Sokoloff, 2000). While both of these explanations generate London important insights, they are subject to shortcomings. The rst type of explanation fails to
*Jonathan Di John University of London, School of Oriental and African Studies, Department of Development Studies, Thrornhaugh Street, Russell Square, London WC1H 0XG. UK. rrez Sa nin, Jo Beall, Rosemary Thorp, and Judith Tendler for helpful I would like to thank Francisco Gutie 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 Conict: The , Columbia, November, 2005. The usual disclaimers apply. Ideas of Albert Hirschman, Bogota ISSN 1360-0818 print/ISSN 1469-9966 online/07/030295-33 q 2007 International Development Centre, Oxford DOI: 10.1080/13600810701514860
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elucidate why such policies and institutions persist, or why decision-makers do not correct such mistakes despite widespread knowledge of the relevant problems. The emphasis on inequality, 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 ` -vis public education in Latin America. The main argument of the paper is pressure vis-a that an important part of the problem is the absence of incentives for 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 upperincome 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 coverage of 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 ` -vis the state is very strong in comparison with similar economic and political power vis-a groups in many other middle-income countries. Evidence of this is not hard to nd. First, upper-income groups, particularly the top 10% of income earners, appropriate extraordinarily high shares of national income in Latin America (Inter-American lites there have been able to Development Bank, 1998). Second, wealthy landowning e 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
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potentially the most progressive tax, its absence in the region reects the inability of the state in Latin America to redistribute income in a more egalitarian manner than it does at present. These three patterns suggest that, relatively speaking, wealthier groups in Latin ` -vis the state and lowerAmerica possess substantial economic and political power vis-a income groups in the region. Another important reason for focusing on wealthier groups is that wealthier parents seem to play a more active role (than parents from lower-income groups) in the academic lives of their children and in determining how the schools their children attend are run (Somers et al., 2004, p. 59). Students from wealthier backgrounds also tend to achieve better academic results whether they attend private or public schools.1 This means that public schools that have greater numbers of students from wealthier socio-economic backgrounds not only have the benet of positive peer pressure for all other students, but also benet from the presence of greater numbers of parents who are likely to exercise their voice in the face of deteriorating quality of schooling. As a result, the extent to which wealthier groups exit from the public school system lessens the extent to which local communities can draw on an important source of voice in civil society. The paper also examines why lower-income groups have not been effective in channelling their voice effectively to demand better public education. I suggest that the structure of political parties is central for aggregating the voice of less privileged groups and individuals. When there is signicant exit to private education, the main mechanism through which effective voice can be constructed is through centralized and effective political parties with a reputation for promoting social service provision. In particular, I highlight that fragmented and clientelist party structures, common in many Latin American countries, limit the coverage and monitoring of public education. The importance of the nature of political parties and political competition in the effective ` ze & Sen, 1989; Kaufman & Nelson, delivery of social services has been examined (Dre 2004a; Keefer & Khemani, 2005). However, much of this literature has focused on lowincome countries. Those studies that focus on Latin American public education (Kaufman & Nelson, 2004) have not provided a systematic incorporation of other factors that are likely to inuence the construction of voice, such as the cost of exiting public education and the level of income tax payments, nor do they place the Latin American experience in comparative perspective with other middle-income regions. Although the introduction of the exit-voice framework is not a new idea, there has, to my knowledge, been no attempt to substantiate the mechanisms through which exit-voice dynamics operate. The small contribution this paper makes is to draw on comparative evidence across regions and to link the insights of the exit-voice framework with political economy work on education reform, taxation and political parties with this comparative evidence. It is hoped that this comparative and synthetic exercise will generate insights and debates concerning the political economy of educational reform. The main argument put forward is summarized in Table 1. The likelihood of households exiting from failing public schools is enhanced when there is: greater state funding of non-state schools (which increases the supply of and demand for non-state education); lower personal income tax payments; ineffective political party capacity to monitor public education; and sufcient household income to afford private schools even in the absence of state funding or private education. The extent to which voice will be used to improve failing public schools is enhanced when there is: lower state funding of non-state schools (religious or private), which reduces the supply of and
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Table 1. Factors inuencing the use of exit and voice options when public school quality declines Exit options tend to increase with: 1) greater state-funding of non-state schools (religious, private) which increases the supply of non-state education and enables more households to afford private education 2) lower personal income tax payments 3) ineffective political party capacity to monitor public education 4) household income sufcient to afford private education irrespective of state-funding of non-state schools Voice options tend to increase with: 1) lower state-funding of non-state schools (religious, private) which reduces the supply of non-state education and limits the number of households that can afford private education 2) higher personal income tax payments 3) effective political party capacity to monitor public education 4) household income insufcient to afford private education in the absence of state-funding of non-state schools
demand for private schools; higher personal income tax payments; effective political party capacity to monitor public education; and insufcient 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 within Latin 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 lites/non-poor groups, when the latter have the options to coalitions between the poor and e use private services (such as health, education, security), that is, exit from public service lites/non-poor groups have the political clout to avoid paying direct use? Moreover, if e taxes, does this lessen even further their interest in public service delivery? Finally, how does 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 1970 2003. Section 3 critically examines some common diagnoses of the nature of the problem. I nd that the identication 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 efcient and equitable alternatives. Moreover, I nd that the extent to which inequality negatively affects education coverage and quality is subject to important qualications. Section 4 presents and applies Hirschmans exit-voice framework to the problem of public education delivery in the Latin 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 lites have to use voice in the face of deteriorating public education quality. incentives e 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
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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 had disappointing 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 1970 2003 (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 much lower income 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 Ferranti et 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 o, 1998). Average school attainment in the 1990s was other regions (Birdsall & London nearly 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 decit in enrolment in secondary education. Latin America has an average decit 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 Ferranti et al., 2003).2 Cross-country evidence suggests that within Latin America the biggest decits 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 Englishspeaking 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 decit 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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Table 2. Youth illiteracy rates in Latin America, East Asia South Africa and Eastern Europe (percentage ages 15 24) Male 1990 Latin America Average Argentina Chile Costa Rica Peru RB Venezuela Ecuador Mexico Colombia Brazil Caribbean Trinidad and Tobago Cuba Jamaica Dominican Republic East Asia Average Korea Thailand Philippines China Malaysia Indonesia Vietnam South Africa Eastern Europe Average Latvia Estonia Poland Hungary Czech Republic 4.2 2 2 3 3 5 4 4 6 9 0 1 13 13 2.5 0 1 3 3 5 3 6 11 0* 0 0 0 0 0 2001 2.7 2 1 2 2 3 2 2 4 6 0 0 9 9 1.2 0 1 1 1 2 2 5 8 0 0 0 0 0 0 Female 1990 4.3 2 2 2 8 3 5 6 4 7 0 1 5 12 4.2 0 2 3 7 6 7 6 12 0 0 0 0 0 0 2001 2.2 1 1 1 5 1 3 3 2 3 0 0 2 8 1.8 0 2 1 3 2 3 4 9 0 0 0 0 0 0 GDP per capita (2000 US$) $4,053 7,726 4,964 4,185 2,046 4,818 1,283 5,935 1,979 3,537 6,326 , 1,500 2,873 2,414 3,240 10,890 2,020 990 856 3,881 800 397 3,019 4,327 3,259 3,987 4,309 4,656 5,422
Note: 0 indicated less than 0.5. Source: World Bank, World Development Indicators.
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 rates in 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 insufcient public spending on education.4 In 1990 and 1995, average public education spending in Latin America was 3.2 and 3.9% of GDP,
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respectively, while in East Asia, average spending was 2.2 and 2.6%, respectively (though, as de Ferranti et al. (2003, p. 84) pointed out, spending on private education in East Asia may well be higher).5 This suggests that the distribution of spending and the efciency with which resources are used are core problems in Latin American education. The available comparative evidence suggests the quality of education in Latin America is decient. In the eld of science and mathematics, the most extensive surveys have been done by Trends in International Mathematics and Science Study (TIMSS), which examined performance by eighth-graders. In 1996, 41 countries participated and of the two Latin American countries in the survey, Colombia ranked 40 out of 41 and Mexico refused to disclose its scores. In 1999, only one Latin American country, Chile, participated, and although Chile is one of the better performers within Latin America6, it ranked 35 out of 38, behind countries such as Indonesia, the Philippines, South Africa and Iran and well below Malaysia and South Korea. The 2003 TIMSS exam yielded similar results. In mathematics, the average score was 466, with the USA obtaining 504. Chile, the only Latin America country participating, ranked 39th out of 45 countries, and again it ranked well below countries with similar or lower levels of income per capita such as Iran, Malaysia, Estonia, Latvia, Hungary and Tunisia.7 In science, Chile ranked 37th out of 45 countries, and again it ranked well below countries with similar or lower levels of income per capita in East Asia and Eastern Europe and did not rank higher than any country with a higher income per capita.8 Another international test compares student achievements internationally through the Organization for Economic Co-operation and Developments (OECD) Programme for International Student Assessment (PISA) (2000). The test was undertaken by 15-year-old students in reading prociency in 31 countries, four of which do not belong to the OECD. One of these was Brazil. Since Mexico belongs to the OECD there were two Latin American countries in the sample. Other countries in the sample included the other OECD countries, some transition economies in Eastern Europe (Czech Republic, Hungary and Poland) and the Republic of Korea. The test examined three dimensions: literacy/reading; mathematics; and sciences. In absolute terms, Mexico and Brazil ranked at the bottom of the table on every scale, with Mexico scoring slightly above Brazil in each category.9 In the 2002 PISA test, ve Latin America countries participated (Argentina, Mexico, Chile, Brazil and Peru). The test ranks the proportion of students from each country achieving prociency over six levels. Overall, students from Argentina and Mexico were the two best performers. Mexico had the lowest proportion of students of any of the Latin American country scoring at the lowest levels of prociency (16% versus 23% for the next best performer, Chile), and Argentina had the highest proportion of students scoring at the two highest level of prociency (11%, versus 9% for the next best performer, Mexico). Within Latin America, Cuba stands out as the country that has achieved the widest coverage and highest quality in the region. Cubas education system is entirely public and public spending as a share of GDP is among the highest in the region (de Ferranti et al., 2003, Table 4.4, p. 84). The socialist government has also made important achievements in improving education coverage. In 1950, the gross secondary school enrolment in Cuba was about 5%; by 1965, it had reached 23%, and continued to rise to 42% by 1975; by 1985, it had reached 82%, the highest level in Latin America (Reimers, 2001, cited in de Ferranti et al., 2003, p. 82). According to ofcial data in 1998, the enrolment rate for 6 16-year-olds was 94.2% and primary school gross enrolment exceeded 100% (Gasperini, 1999, p. i). Repetition rates were 1.9% in primary school, 2.8% in secondary
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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 the Cuban 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 1980 2000, as o, 1998). There is little conclusive some authors have suggested (Birdsall & London 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 most advanced 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 identication of several sub-optimal policies and institutional arrangements. Among the most cited problems is the inefcient use of resources. The best evidence to support this analysis is the fact that Latin Americas poor education performance in recent decades is not necessarily due to a lack of public spending. Moreover, the worsening in that performance in the period 1970 2000 has coincided with average increases in 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 identied include: inequitable access to the education system; disproportionate spending on higher education which benets upper-income groups; insufcient resources spent on primary and secondary education, which would tend to benet poorer income groups; poor teaching; lack of incentives for efciency; 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 o, 1998; Lee & Barro, 2001; Kaufman & Nelson, difcult to reach (Birdsall & London 2004c).12 However, the simple identication 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 rst 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 efciency, 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 of international 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 metro) provide an insight into the America (conducted by the survey rm Latinobaro 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. 253 257); 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 the government to correct 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 nance education expansion that would benet the poor; or (c) supporting expenditure switching away from the costly subsidization of higher education (which tends to benet wealthier groups) toward nancing primary and secondary education (which tends to benet 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 difcult 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 the incentive 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 much work on poverty and aid effectiveness has focused on dening 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 reect power relations. For instance, establishing rights around a shery provides the incentives to manage the sh stock efciently. However, in a world of scarce resources, establishing shing rights simultaneously imparts a distributional advantage that favours those able to become the owner of the shery. It is thus not possible to separate issues of incentives and efciency
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from issues of distribution and equity. A similar problem arises when considering public education spending. In a world of scarce resources (particularly in countries where income per capita is low or the tax effort is failing), groups battle over the assignment of resources assigned to different levels of education spending. As time passes, spending patterns come to be perceived as entitlements by individuals and groups that receive the benets of such spending. For instance, in the UK, higher education has historically been subsidized by the state. The introduction of university fees has created widespread resistance among the middle class. A similar story emerges in Latin America, where the introduction of university fees or proposals to switch expenditure away from higher education and in favour of primary and secondary education met with vocal resistance not from the poor, but from upper-income groups who see free university education as an entitlement. This is especially so for parents who spend signicant sums of money educating their children in good private schools with the expectation that their children will have a better chance of gaining entrance to public universities. As a result, conict and conict settlements and thus the political process involving contestations over tax and expenditure policies are an intrinsic part of the process of building effective institutions. The second common explanation of poor education performance in Latin America o, 1998; focuses on the role of unequal income and asset inequality (Birdsall & London Mariscal & Sokoloff, 2000). These explanations are important in part because they attempt to grapple with the persistence of sub-optimal performance in Latin American education. As is well known, Latin America has the most unequal income and land distribution of any region in the developing world (Deininger & Squire, 1996, 1998), which implies that the challenges of redistributive public taxation and spending are of more urgency in Latin America. Table 3 compares income distribution across developing country regions.15 It is important to note that there are signicant variations in income inequality within Latin America. Brazil, Chile, Colombia and Mexico have particularly unequal income distributions, while Costa Rica, Venezuela, Peru and the Dominican Republic have somewhat lower levels of inequality, and Jamaica and Trinidad and Tobago have more equal distributions, similar to those of many East Asian economies. Cuba probably has the most equal income distribution in the region (see Mesa-Lago, 2000, Table 5.14, p. 639). Within East Asia, Malaysia and the Philippines have the most unequal income distribution (similar to the degree of inequality in Venezuela and Peru). All of the Eastern European countries are more egalitarian than the Latin American countries. South Africa has the most unequal income distribution in the sample, similar to that of Brazil. What is particularly notable is the signicantly higher share of income controlled by the top 10% of income earners, which approaches nearly 50% in some Latin American countries. So how does inequality affect the persistence of poor education coverage and quality in Latin America? Mariscal & Sokoloff (2000) attempt to explain why the USA and Canada far outperformed the other countries in the Americas in terms of primary and secondary education coverage and in literacy in the 19th Century. Indeed, by 1870, more than 80% of the population aged 10 or above in both the USA and Canada were literate, more than triple the proportions in countries such as Argentina, Chile, Costa Rica and Cuba and four times the proportions in Brazil and Mexico (Mariscal & Sokoloff, 2000, p. 171). Their main argument was that, despite similar income per capita levels between North America and Latin America and the Caribbean at the beginning of the 19th Century, the greater income and asset inequality in Latin America played an important role in the differential
Table 3. Income inequality in Latin America, East Asia, Eastern Europe and South Africa in the 1990s Latin America Survey year lowest 20% lowest 40% highest 20% highest 10% Gini Index* East Asia survey year lowest 20% lowest 40% highest 20% highest 10% Gini Index* Eastern Europe survey year lowest 20% lowest 40% highest 20% highest 10% gini Index* Brazil 1996 2.5 5.5 63.8 47.6 60.0 Chile 1994 3.5 6.6 61.0 46.1 56.5 Colombia 1996 3.0 6.6 60.9 46.1 57.1 Mexico 1995 3.6 7.2 58.2 42.8 53.7 Philippines 1997 5.4 8.8 52.3 36.6 46.2 Ecuador 1995 5.4 9.4 49.7 33.8 43.7 Thailand 1998 6.4 9.8 48.4 32.4 41.4 Estonia 1998 7.0 18.0 45.1 29.8 37.6 Caribbean Trinidad & Tobago Jamaica Dominican Republic 1992 2000 1998 5.5 6.7 5.1 7.6 17.4 13.7 47.9 46.0 53.3 31.8 27.4 37.9 40.3 37.9 47.4 Costa Rica 1995 4.0 8.8 51.8 34.7 47.0 Peru 1996 4.4 9.1 51.2 35.4 46.2 Venezuela 1996 3.7 8.4 53.1 37.0 48.8 South Africa 1995 2.0 6.3 66.5 46.9 59.3
Indonesia Korea Malaysia 1996 1993 1995 8.0 7.5 4.5 11.3 12.9 8.3 44.9 39.3 53.8 30.3 24.3 37.9 36.5 31.6 48.5
Latvia Poland Hungary Czech Republic 1998 10.5 23.5 40.3 25.9 32.4 1998 7.8 20.6 39.7 24.7 31.6 1998 10 24.7 34.4 20.5 24.4 1996 10.3 24.7 35.9 22.4 25.4
* 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 to reduce/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 benets across the population would be signicantly different from the incidence of taxes and other costs or because population heterogeneity makes it more difcult for communities to reach a consensus on public projects. lites could procure Where the wealthy enjoy disproportionate political power, e private schooling for their own children and resist being taxed to underwrite or subsidize 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 lite can the right to cast a vote is one of the most direct . . . channels through which an e exercise disproportionate political inuence (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 reduce the 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
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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 planned economies 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 specic 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 higher coverage 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 prociency and had the second highest proportion of students (behind Argentina) scoring at the two highest levels of prociency.18 o (1998) argue that high income From a different perspective, Birdsall & London 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 for education. 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 o (1998, p. 125) argue that the supply of education might also be Birdsall & London 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 upperincome groups will have to be larger to nance 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 this is 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 o provide) is on average higher than in East Asia, the sample Birsdall and London 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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Table 4. Budget allocation to higher education, 1990 94 (as percent of overall education budget) East Asia Malaysia Thailand Indonesia Korea, Rep. Simple average 17 17 18 8 15 Latin America Argentina Brazil Chile Colombia Costa Rica Ecuador Mexico Uruguay Venezuela Simple average
o (1998: Table 4, p. 127). Source: Birdsall and London
17 26 20 17 31 24 14 25 35 23
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 being more 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 exitvoice 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 they judge that another rm 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 efciency. 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
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perish, thus providing the incentive structure for rms 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 wellknown difculties 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 inuencing 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 rst 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 upperincome groups, and thus reects a high degree of bargaining between the state and upperincome groups about why the taxes are collected and for what purpose (Lieberman, 2002, pp. 99 100). 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 how public 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 rst 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 1980 2001, the share of private enrolment in primary education in Latin America averaged 15% compared to an average of 5% in East Asia, 2% in South Africa
Table 5. Private enrolment in education: Latin America, East Asia, South Africa and Eastern Europe compared (private enrolment as percentage of total enrolment) Primary School Latin America Average Argentina Bolivia Brazil Chile Colombia Costa Rica Eucador Mexico Peru Uruguay Venezuela 1980 13 18 8 13 20 14 3 16 5 13 16 13 1985 1990 1996 17 20 na 11 42 19 5 18 6 12 16 18 2001 17 20 21 8 38 19 7 27 8 14 13 14 1980 1985 Secondary School 1990 24 29 26 na 42 39 10 na 12 14 17 29 1996 20 na na na 45 na 11 na 11 16 16 na 2001 21 25 29 11 25 28 12 32 16 17 12 26
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14 15 19 19 8 10 12 14 32 39 13 15 3 5 16 na 5 6 14 12 15 16 13 14 Primary School 1998 2001 6 5 14 Primary School 1990 3 na 1 0 7 10 0
25 25 39 30 17 na na na 24 39 45 42 9 9 34 34 19 12 15 15 17 15 26 25 Secondary School 1998 8 na 32 2001 18 3 23
Caribbean Trinidad & Tobago Jamaica Dominican Republic East Asia Average Indonesia Korea Malaysia Philippines Thailand China Vietnam 1980 6 21 1 na 5 8 0
5 na 12 1985 6 17 1 na 6 9 0
Secondary School 1996 4 na 2 1 7 13 0 0 2001 6 16 1 4 7 14 0 0 1980 26 49 46 na 48 13 0 0 1985 17 na 39 8 41 12 0 0 1990 15 na 41 4 36 10 0 0 1996 14 na 38 3 29 6 0 10 2001 18 43 38 7 22 6 0 11
Table 5. Continued
South Africa
na
0 1 Primary School 1998 2 1 1 5 1 2001 2 1 2 1 5 1
na 1 Secondary School 1998 3 1 1 6 6 2001 4 1 2 5 6 7
Eastern Europe Average Latvia Estonia Poland Hungary Czech Republic
Source: UNESCO, World Education Report (1991, 1993, 1995, 1998 and 2000) and EFA Global Monitoring Report 2005.
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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, had relatively 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 1985 2001 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 transition economies 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 (Somers et 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 it is 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 exit to 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-nanced 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 middleincome regions. Indeed, of the Latin American countries with the highest degree of income inequality (Brazil, Chile, Mexico and Colombia), only Chile is above the Latin 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.
Albert Hirschmans Exit-voice Framework 4.2 Personal Income Taxation in Comparative Perspective
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The second factor that inuences 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 ` -vis uppertaxes) provides an important insight into their power and legitimacy vis-a 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 1997 2002 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 1997 2002, 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 signicant difference in personal income tax collection in 1997 is not due 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 ve times higher in the Englishspeaking 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 period 1985 88, 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 1975 78 and 1985 88, 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 lowest levels 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 1997 2002 (Di John, 2006, Table 3, p. 14). The Eastern European and the English-speaking Caribbean economies had more than double the 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 1997 2002 (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 inuencing the platforms of political parties with respect to the issue of the quality
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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 of GDP, %) 1975 78 Latin America Average Argentina Brazil Chile Colombia Costa Rica Mexico Peru Venezuela Caribbean Trinidad & Tobago Jamaica Dominican Republic East Asia Average Indonesia Korea Malaysia Philippines Thailand Taiwan South Africa Eastern Europe Average Latvia Estonia Poland Hungary Czech Republic 1.7 0.4 0.2 3.3 1.8 2.9 2.7 1.5 1.0 2.6 5.4 1.1 1.8 0.8 1.9 2.1 1.6 1.1 3.4 6.1 1.2 0.8 0.2 1.1 1.6 2.2 2.0 na 1.0 6.6 1.1 2.3 0.9 2.8 2.4 1.1 1.9 4.5 7.7 1.0 1.1 1.4 na 0.6 0.7 na 1.5 1.0 5.4 5.5 1.8 3.9 3.5 3.6 6.1 2.6 2.2 5.2 12.9 6.8 6.5 7.7 6.7 7.8 5.2 1985 88 1997 2002 2000 GDP per capita (2000 US$) $4,399 7,726 3,537 4,964 1,979 4,185 5,935 2,046 4,818 6,326 2,873 2,414 3,716 800 10,890 3,881 990 2,020 3,019 4,327 3,259 3,987 4,309 4,656 5,422
Source: IMF Government Financial Statistics and International Financial Statistics, IMF; Statistical Yearbook of the Republic of China 2002 for Taiwan.
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 nance 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
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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 to reform 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 patron client relations tend to produce an oversupply of tangible, targeted benets 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 fullling their promises to clients. Universal access to education is not easily targeted and improvements in quality are also difcult to target, both because they tend to involve managerial improvements that spread throughout the system and because they are difcult 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 uid nature of many clientelist polities, the time horizon of many politicians is short-term: Promises that concern jobs or public works can be fullled 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 nd 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 decentralization 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 identied 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. 140 142). 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 regional lites (Archer & Shugart, 1997). This makes building coalitions around large-scale e reforms in education difcult. 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 ` ze & Sen, 1989, are greater than would be expected for their per capita income (Dre 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 the less 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 best performers 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 nonstate 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 (within Latin 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 and secondary 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 ` ze & Sen, 1989, pp. 229 239). It is authoritarian period under the Pinochet regime (Dre
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important to note that Chile is the only country with high levels of private enrolment and low personal income tax (in more recent years) that has had relatively good education indicators 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 highest rate 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 ` ze and Sen parties and the ethos of social service provision have survived in Chile, as Dre 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 the lowest shares of personal income tax in the region, with its share increasing to just slightly above the Latin American average in the period 1997 2002.33 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: rst, 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 nance 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 inuential 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 signicant 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 by regionally based, fragmented and clientelist political parties that make aggregating voice among the less privileged a difcult 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 reected 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 evidence that 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 difcult to aggregate. However, it is important to distinguish between types of patron client 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 strong presidential 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. 72 77, 360 373). 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 mostly state-led affairs spearheaded either by presidents or by small teams of bureaucrats in the education and planning ministries and by initiatives taken by international nancial 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
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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 middleincome 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 net enrolment 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 of vouchers 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. 107 111) 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: rst, 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 of the 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 students widened 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 beneted 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. 60 69). 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 only further induces exit by those middle-class parents who can afford to benet from such policies, but also sends a demoralizing signal to those working in the public education sector 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 lessdeveloped 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 and reduces 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-regional data 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 (without a 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 public education, 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 signicant political, scal and institutional 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 distribution and low per capita income levels) 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 education systems. 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. lites are forced to pay income The big picture that emerges is that when economic e 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, a serious 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 signicantly larger group) to exit the public education system. Moreover, state revenue in the region is increasingly nanced 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 difcult. 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 lites and the policy implications. Good government depends in part on the incentives of e 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 conicts of interest within 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 other factors that inuence the structure of voice may not necessarily improve education coverage and quality. There is wide variation of 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 achieve sustainable improvements in coverage and quality. Notes
1
3 4 5
The average Latin American adult in the richest 10% of the income distribution has seven more years kely, 1999). of education than an adult in the poorest 30% (Hausmann & Sze Low enrolment rates at the secondary level are partly the result of high repetition rates and late entry into primary school (de Ferranti et al., 2003, footnote 2, p. 21). The data in this paragraph are from Lee & Barro (2001, Table 2, p. 474). The data in this paragraph draw on de Ferranti et al. (2003, Table 4.4, p. 84). Within Latin America, education spending in 1990 and 1995 was particularly high in Cuba (6.6 and 6.8%, respectively) and Jamaica (5.4 and 6.4%, respectively). Within Latin America, a UNESCO study revealed that for primary education students, Cuban students perform best, with Argentina, Brazil and Chile the next best performers (Ratliff, 2003, p. 10). The mean scores in mathematics for the following less-developed countries were: Korea (589), Taiwan (585), Estonia (531), Hungary (529), Malaysia (508), Iran (411), Indonesia (411), Tunisia (410), Egypt (406), Chile (387), the Philippines (378) and South Africa (264).

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The mean scores for the following less-developed countries in science were: Taiwan (571), Korea (558), Estonia (552), Hungary (543), Latvia (543), Malaysia (510), Bulgaria (479), Iran (453), Indonesia (420), Chile (387), the Philippines (377) and South Africa (244). The mean score on reading/literacy was 494, the OCED average was 500. The scores for the following less-developed countries were: Korea: 525; Latvia: 458; Russian Federation: 462; Hungary: 480; Mexico: 422; and Brazil: 396. The 1998 UNESCO/OREALC exam in language, maths and science for third-graders for all Latin American countries found that Cuban students score signicantly more highly than students in all Latin American counties (Gasperini, 1999, p. i). The sample of eight countries consisted of Argentina, Brazil, Colombia, Costa Rica, Mexico, Nicaragua, Peru and Venezuela (Kaufman & Nelson, 2004, Table 1,2, p. 10). There were important variations in spending across these countries. For instance, in 2000 central government spending in Costa Rica was the highest at 6.2% of GDP, Colombias was 4.5% of GDP, with the Peru at the bottom end at 2.0% of GDP. Lee & Barro (2001, p. 487) presented the data on the superior performance of East Asian and Centrally Planned countries in comparison to Latin American countries in the period 196090, but acknowledged that they do not attempt to explain why East Asian education systems perform better. For a discussion of type I and type II failures, see Khan (1995, pp. 7273). The cost of providing a single student with a free education in university education is estimated to be 50 times higher than the cost of supporting a student in primary school. This means that for every student in a Latin American university, fty poorer students will either not go to primary school or will attend one of inferior quality (Ratliff, 2003, p. 14). For a discussion of the data on income distribution in Latin America, see Inter-American Development kely & Hilgert (1999). Bank (1998) and Sze The authors recognize two important methodological concerns in their argument. First, estimates of inequality are poor and exist for few countries. Second, it is difcult to identify causality because the provision of universal primary education has a powerful effect on the degree of inequality in the dimensions considered (wealth/income, human capital and political power) (Mariscal & Sokoloff, 2000, p. 198). ` ze & Sen (1989, pp. 226253) on the advancement of education in Communist regimes See Dre (China, Cuba) and in capitalist authoritarian ones (i.e. Chile in the Pinochet period). In the latter case, the authors argue that political pressure from civil society and the long tradition of democratic and pluralist politics were important for the extension of social services even in an authoritarian setting. For Communist regimes in Eastern Europe, China and Cuba, success in extending the quantity and quality of education was integral to the construction of national identity (de Ferranti et al., 2004, p. 85). On the other hand, rates of illiteracy in Mexico increased from 1990 to 2001 (Table 1). o (1998, p. 124) illustrated this point with a comparison of Brazil and Malaysia, two Birsdall & London countries with similar income per capita, in 1989. Income distribution in Brazil is much more unequal: the income share of the bottom 20% is 2.4% in Brazil, and nearly double, at 4.6% in Malaysia. As a result the per capita income of the bottom 20% is US$1075 in Malaysia and US$513 in Brazil. They argued that given an income elasticity of demand for secondary education of 0.50 (a conservative gure), secondary enrolment in Brazil would have been 40% higher if income distribution in Brazil had been at the level of inequality in Malaysia. This second factor needs to be treated with caution. One, there was great progress in education coverage in the period 195080, when the nature of production was no less skewed toward large-scale plantation agriculture and mineral resource extraction than it was in 1980 2000, when the deterioration in the quality and coverage of education occurred in Latin America. Moreover, the relatively successful education performance in terms of quality and coverage in some natural resourcerich counties such as Malaysia, Botswana, Chile and Norway would not be explained with this analysis. Mineral abundance does not determine either income inequality levels or the composition and level of taxation and public education spending. The relevance of exit options for households is dependent on two factors. First, the household earns enough income to afford private education. Most households cannot afford private education, particularly in low-income countries and/or in countries with very unequal distributions of income. Second, the state funds non-public education (religious schools and secular private schools) either through direct subsidies to non-public schools or through the introduction of voucher schemes. This,
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ceteris paribus, would allow a greater number of households to consider the option of private education. It is important to point out that the division between public and private schools is not clear-cut, since direct public funding to government-dependent and independent private schools is prevalent in less-developed countries (UNESCO, 2004, p. 65). See Gasperini (1999). For a discussion of the now advanced countries experiences, see Lindert (2004, pp. 87170). See Di John (2006, pp. 1216) for an analysis of why personal income tax collection is relatively low in Latin America in the period 19972002. Different patterns of English and Spanish colonialism and the institutions they left behind may have inuenced differences in tax policy between the Caribbean and Latin America (Thirsk, 1997). The British Caribbean countries inherited legal institutions that enabled the development of more formal labour markets, which can explain, in part, the higher capacity of these countries to collect income tax compared to Central and South American economies (Stotsky & WoldeMariam, 2002). Additionally, Caribbean countries generally inherited parliamentary systems of governance, which may offer more lites to pay taxes than in the generally more feasible mechanisms of institutionalizing pacts with e presidential systems in Latin America (Stotsky & WoldeMariam, 2002). It is also important to note that, contrary to the Mariscal and Sokoloff model, high levels of income inequality do not preclude government action to undertake progressive taxation, as countries with high levels of income inequality such as South Africa and Malaysia have been able to collect high levels of personal income tax. It is also worth mentioning that, in the 1970s, Chile had the highest share of personal income tax in the region (see further discussion of the Chilean case in Sections 5 and 6). Mexico and Costa Rica had the highest shares of personal income tax collection in the period 198588 and the second and third highest shares (after Chile) in the period 197578. See Di John (2006, pp. 12 16) for a discussion of the political economy implications of the reliance on indirect taxes (especially value-added taxes) in Latin America. It is important to note here that standard analysis of tax incidence indicates that who bears the ultimate burden of the tax may be substantially different from who pays the tax in the rst instance. For example, a corporation may not pay the full amount of a corporate tax if it can shift some of that burden to consumers via higher prices or if it can force workers to accept a lower wage (Stiglitz, 1986, pp. 411455). See World Bank (2004, pp. 8086) for an analysis of the nature of political organizations and competition and their effects on the coverage and quality of pro-poor service delivery. The Communist countries (Cuba, China, Soviet Union) also all had very disciplined and centralized party structures. Of course, in Communist countries the use of voice in the sense Hirschman uses the term was limited given the repression of political rights. However, one of the sources of legitimacy in such regimes was to provide high-quality education for all. In effect, the party and state in Communist countries acted as voices for the poor by providing high-quality education and did not permit the exit option of private sector education at any level of education. The almost universally superior performance of education in Communist countries does suggest that prohibiting exit options is more likely to force a regime to deliver high-quality state education to the population. In this sense, the source of state legitimacy and the ideology of the dominant political parties may be a more important factor for delivering high-quality public education than whether the regime is more or less democratic. It is important to note that the shares of personal income tax declined in most countries in the region over the period 19752002 (Di John, 2006, pp. 1216). While personal income tax shares declined in Mexico and Costa Rica over this period, both countries still had the highest shares of personal income tax collection (2.0 and 2.2% of GDP, respectively) in the region (the average personal income tax collection in Latin American was 1.2% of GDP) through the period 198588, as indicated in Table 6. In the period 19972002, Costa Ricas personal income tax share declined to 0.7% of GDP (slightly below the Latin American average of 1.0% of GDP). Since 1997, neither Chile nor Mexico has published disaggregated data on personal income tax, which is now included under the aggregate category of direct income tax (which combines personal and corporate income tax). However, the share of direct income tax in Chile and Mexico in the period 19972002 was 4.2 and 4.5% of GDP, respectively, which was above the Latin American average of 3.9% of GDP (Di John, 2006, Table 3, p. 14). The decline in personal income tax shares across the region, including countries that have social
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democratic parties, does not augur well for the construction of progressive welfare systems in Latin America (see Conclusion). The relatively low personal income tax collection in Brazil is all the more paradoxical since the Brazilian state has indeed achieved among the highest tax takes as a percentage of GDP in Latin America (and indeed among all less-developed countries) in the 20th Century, and in the period 19902004, has increased its take from 22% of GDP to over 30% of GDP (Di John, 2006, p. 10). As a result, the Brazilian state relies on a series of inefcient and regressive indirect taxes such as multitiered value-added taxes and nancial transaction taxes (Di John, 2006). It will be interesting to see the effects the emergence of multi-party electoral competition will have on the Mexican public education system lites and found them Tendler (2002) examined, with the use of surveys, the attitudes among business e to be unsupportive of initiatives to improve education. Despite the public discourse of the business lites were sector in acknowledging the value of education as central to poverty reduction, business e more supportive of public investment in infrastructure and in improved security of property rights than in improving education (personal contact with Judith Tendler). The one country in East Asia that performs poorly relative to its income level is Thailand. Despite having a similar income per capita to Peru, workers educational attainment in Peru is more than 1 year greater than is the case in Thailand (7.3 years compared with 6.1 years) (de Ferranti et al. (2003), p. 25). Thailand is also the country that has one of the highest levels of private enrolment in primary education in East Asia, as indicated in Table 3. For a discussion on the political economy of the Malaysian states redistributive policies under the New Economic Policy (NEP), initiated in 1970, see Gomez & Jomo (1997). While econometric work may contribute to testing the hypotheses put forward here, the fact that so few Latin American countries participate in international tests (which is itself an indication of the lagging educational performance in the region) would make such an exercise difcult to undertake at this time. See Di John (2006).
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Hirschman's exit-voice framework and Latin American education

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This article was downloaded by: [Erasmus University] On: 11 March 2014, At: 02:51 Publisher: Routledge Informa

Oxford Development Studies

Oxford Development Studies, Vol. 35, No. 3, September 2007

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Albert Hirschmans Exit-voice Framework

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Downloaded by [Erasmus University] at 02:51 11 March 2014

Albert Hirschmans Exit-voice Framework

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Downloaded by [Erasmus University] at 02:51 11 March 2014

Albert Hirschmans Exit-voice Framework

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Downloaded by [Erasmus University] at 02:51 11 March 2014

Albert Hirschmans Exit-voice Framework

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Albert Hirschmans Exit-voice Framework

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Albert Hirschmans Exit-voice Framework

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Albert Hirschmans Exit-voice Framework

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14 15 19 19 8 10 12 14 32 39 13 15 3 5 16 na 5 6 14 12 15 16 13 14 Primary School 1998 2001 6 5 14 Primary School 1990 3 na 1 0 7 10 0

25 25 39 30 17 na na na 24 39 45 42 9 9 34 34 19 12 15 15 17 15 26 25 Secondary School 1998 8 na 32 2001 18 3 23

Secondary School 1996 4 na 2 1 7 13 0 0 2001 6 16 1 4 7 14 0 0 1980 26 49 46 na 48 13 0 0 1985 17 na 39 8 41 12 0 0 1990 15 na 41 4 36 10 0 0 1996 14 na 38 3 29 6 0 10 2001 18 43 38 7 22 6 0 11

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0 1 Primary School 1998 2 1 1 5 1 2001 2 1 2 1 5 1

na 1 Secondary School 1998 3 1 1 6 6 2001 4 1 2 5 6 7

Eastern Europe Average Latvia Estonia Poland Hungary Czech Republic

Albert Hirschmans Exit-voice Framework

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Downloaded by [Erasmus University] at 02:51 11 March 2014

Downloaded by [Erasmus University] at 02:51 11 March 2014

Albert Hirschmans Exit-voice Framework

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Downloaded by [Erasmus University] at 02:51 11 March 2014

Albert Hirschmans Exit-voice Framework

Downloaded by [Erasmus University] at 02:51 11 March 2014

Downloaded by [Erasmus University] at 02:51 11 March 2014

Albert Hirschmans Exit-voice Framework

Downloaded by [Erasmus University] at 02:51 11 March 2014

Downloaded by [Erasmus University] at 02:51 11 March 2014

Albert Hirschmans Exit-voice Framework

Downloaded by [Erasmus University] at 02:51 11 March 2014

Downloaded by [Erasmus University] at 02:51 11 March 2014

Albert Hirschmans Exit-voice Framework

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Downloaded by [Erasmus University] at 02:51 11 March 2014

Albert Hirschmans Exit-voice Framework

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Downloaded by [Erasmus University] at 02:51 11 March 2014

Albert Hirschmans Exit-voice Framework

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