Essays on Education in Costa Rica

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My dissertation consists of three chapters related to education economics. In the first chapter, I investigate the effects of class size on educational outcomes for secondary schools of Costa Rica. To assess the impact of class size, I take advantage of an administrative rule that sets caps to the size of classes in schools. My results suggest that class-size reductions have a positive and statistically significant effect on pass rates for students in lower secondary education. In particular, a reduction of 10 students raises pass rates by 5 percentage points, which represents a 5% increase in the historical pass rate in lower secondary education. I find that the effect of class size on pass rates in upper secondary education is statistically significant only for schools in rural areas. Specifically, a class-size reduction of 10 students in upper secondary education yields an increase of 11% in the historical pass rate for rural schools. Other measures of educational attainment, such as the graduation rate, yield similar findings, but these estimates lack statistical precision. Overall, results of this chapter indicate that rural secondary schools would benefit the most from class-size reductions. This finding is important to inform the ongoing discussion in the country on how to reform class size formation, and how to allocate resources and teachers across urban and rural areas.Chapter 2 is joint work with Erich Battistin. We study the effects of granting tenure (i.e., open-ended contracts) to primary school teachers using quasi-experimental variation in job offers arising from the centralized recruitment algorithm in Costa Rica. This algorithm matches applicants to school districts using Deferred Acceptance (DA) matching with non random tie-breakers, and school-teacher matches within districts are formed at random. We use the job offers resulting from this algorithm as instruments for the tenure status of teachers in regressions that adjust for the applicant’s “risk” of being granted tenure. Using teacher employment records combined with census and payroll data, we study the interplay between improved job security, better and more stable income trajectories, and outcomes at the school of employment after tenure. Our findings indicate that tenure has negative effects on future educational outcomes. There is, therefore, a definite need to reform the current recruitment process of teachers in Costa Rica to better target high value-added applicants prior to offer tenure positions. Finally, chapter 3 evaluates the effect of unconditional salary bonuses on upward mobility and future salary trajectories of teachers, as well as on educational outcomes of students. I take advantage of the centralized recruitment process in Costa Rica, where applicants may receive different wage offers from the same school district depending on which school they are matched to by the centralized algorithm. Specifically, only certain schools within the same school district are eligible for wage bonuses. To assess the impact of being employed in a school with bonuses, I use an event study design that exploits the random assignment of applicants to positions within school districts. My findings indicate that wage bonuses have a positive impact on the career prospects of teachers. In particular, I find that being employed in a school with bonuses induces a permanent shift in a teacher’s wage profile that represents approximately 5% increase in annual earnings. Also, this permanent change in compensation allows teachers to negotiate better job positions in the future. In addition, I document a positive impact on student learning outcomes two years after receiving the bonus offer.