Policy: Free Higher Education in Chile

The newly elected Chilean President Michelle Bachelet promises to make higher education in Chile for free. Higher education spending in Chilean private educational sector accounted 2% of GDP of the entire country, a percentage that is one of the largest in the world. According to this article, the government is planning to cover future college student tuition by using new taxes that aim to transfer the 2% of GDP from private to public sector.

In order to examine whether this intended solution is feasible, I am going to apply Becker’s theory. According to his theory, if a policy has a high deadweight lost, both tax payers and subsidy beneficiaries will choose to reject the policy. This is because the deadweight lost increases the payment of the taxpayers and increase the cost of increasing a subsidy. Following this logic, the policy that president Bachelet intend to force might not be feasible because it is inefficient to society. Transferring the 2% of GDP from private to public sector can generate big deadweight loss because many institutions might lose future tuitions and, therefore have fewer resources to maintain and update their systems. In a long run, this can mean a deterioration of the Chilean higher education system. As such, I believe that both the taxpayer and subsidy group in Chile should oppose this policy.