Flexibility and Managerial Autonomy
In order to maximize the benefits of competition and markets, economic agents need autonomy and flexibility in organizing the services they offer. Governments restrict most markets on the margins (e.g., child or slave labor), but generally leave economic agents on their own to decide how to buy inputs and organize production. However, providers of social services are often severely constrained. In Chile, vouchers gave parents choice, but school managers in public schools had little autonomy to respond to market signals because they did not control their two major inputs: curriculum and personnel (hiring/firing and salaries) (Aedo 1998; Kubal 2006; Mizala and Schneider 2014b).13 Outside of these core areas, school administrators have incentives to improve quality and efficiency, but the gains of quasi-markets are likely to be modest if restricted to this small realm.14
The sorts of rigidities remaining in Chile are more common elsewhere in the region. Inflexibilities are the greatest in personnel management, due primarily to civil service statutes and unions (Stein et al. 2005, Chap. 10). Teachers and healthcare workers in most countries are public employees, sometimes with their own special employment statutes and sometimes protected as tenured civil servants. Reformers in many cases preferred to proceed with quasi-market reforms before tackling the much more politi?cally explosive issues of reducing employment rigidities or protections. However, if providers cannot adjust what is usually the main input—personnel—then the benefits of competition are likely to be quite modest.