We investigate whether differences in management explain variation in productivity and whether different labor market policies can impact the allocation of managerial effectiveness. Using data on the universe of students and school personnel in Chile, we establish three main findings. First, there is substantial variation in principals' ability to improve students' learning. Second, effective principals are recognized by the school community, decrease teachers' turnover, and obtain higher wages, especially in private schools. Third, despite relatively rigid wages, public schools can attract better principals by improving personnel selection.
