EDUCATIONAL OUTCOMES IN OECD COUNTRIES
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qualities makes it difficult to regulate or legislate having high-quality teachers in
classrooms. It also contributes to our conclusions below that changes in the institutional
structure and incentives of schools are fundamental to improving school outcomes.
6.3. Institutional structures and incentives in the school system
Similar to the importance of economic institutions for national economies, it is
difficult to have a highly functioning education system without a supportive institutional
structure. On this matter, however, there are more different opinions and perhaps a
wider divergence in outcomes. Part of the reason for the divergent opinions is simply a
lack of sufficient experience, analysis, and evidence.
The evidence does suggest some clear general policies that are important. Foremost
among these, the performance of a system is affected by the incentives that actors face.
That is, if the actors in the education process are rewarded (extrinsically or intrinsically)
for producing better student achievement, and if they are penalized for not producing
high achievement, achievement is likely to improve. The incentives to produce high-
quality education, in turn, are created by the institutions of the education system - the
rules and regulations that explicitly or implicitly set rewards and penalties for the people
involved in the education process. Therefore, one might expect that institutional features
have important impacts on student learning.
The unifying theme of these institutional studies is that the key to improvement
appears to lie in better incentives - incentives that will lead to managerial decisions
keyed to student achievement and that will promote strong schools with high-quality
teachers. Here, three interrelated policies come to the forefront: promoting more
competition, so that parental demand will create strong incentives to individual schools;
autonomy in local decision making, so that individual schools and their leaders will take
actions to promote student achievement; and, an accountability system that identifies
good school performance and leads to rewards based on this.
Choice and Competition. Choice and competition in schools were proposed a half
century ago by Milton Friedman (1962). The simple idea is that parents, interested in
the schooling outcomes of their children, will seek out productive schools. This
demand-side pressure will result in incentives for each school to produce an effective
education system. These incentives will also put pressure on schools to ensure high-
quality staff in addition to a good curriculum.
In many school systems (with the Netherlands being the most obvious example), a
number of privately managed schools provide alternatives for students. These schools,
which also often have a religious affiliation, are part of the natural institutional
framework. Unfortunately, little thorough evaluation has been done of the choice
possibilities, in large part because there is no obvious comparison group (i.e., choice is
instituted for an entire country and there is no example of the no-choice alternative). In
a cross-country comparison, students in countries with a larger share of privately
managed schools tend to perform better on average (cf. Woessmann (2007b, 2009);