The paradox of schools choice revisited

Diminishing returns is a feature of many things in life. School quality is one example. It is already widely acknowledged that a significant part of learning takes place outside the classroom through parental and peer engagement, and other off-classroom sources. This also means that incremental school quality beyond a certain level is unlikely to have any effect. 

This point about the importance of school quality is brought out in a new paper that uses data from parental preferences, peer quality, and causal effects on outcomes for applicants to New York City's centralised high school assignment mechanism,

School choice may lead to improvements in school productivity if parents’ choices reward effective schools and punish ineffective ones. This mechanism requires parents to choose schools based on causal effectiveness rather than peer characteristics... We use applicants’ rank-ordered choice lists to measure preferences and to construct selection-corrected estimates of treatment effects on test scores, high school graduation, college attendance, and college quality. Parents prefer schools that enroll high-achieving peers, and these schools generate larger improvements in short- and long-run student outcomes. Preferences are unrelated to school effectiveness and academic match quality after controlling for peer quality... 

Moreover, no subgroup of parents systematically responds to causal school effectiveness. We also find no relationship between preferences for schools and estimated match quality. This indicates that choice does not lead students to sort into schools on the basis of comparative advantage in academic achievement. This pattern of findings has important implications for the expected effects of school choice programs. Our results on match quality suggest choice is unlikely to increase allocative efficiency. Our findings regarding peer quality and average treatment effects suggest choice may create incentives for increased screening rather than academic effectiveness. If parents respond to peer quality but not causal effects, a school’s easiest path to boosting its popularity is to improve the ability of its student population. Since peer quality is a fixed resource, this creates the potential for socially costly zero-sum competition as schools invest in mechanisms to attract the best students. MacLeod and Urquiola argues that restricting a school’s ability to select pupils may promote efficiency when student choices are based on school reputation.

The results of the new study and its concerns about zero-sum competition among school managements is confirmed by anecdotal and other qualitative accounts of how the best schools in India compete to attract the best students. This, in turn, allows them to command a disproportionate fee premium. The quality divide gets exacerbated in the process, leaving the best performing children in a few schools and the rest to struggle in the large majority. 

I have blogged earlier, using the logic of Schelling's chessboard experiment, to argue that school choice is likely to lead to 'emergent outcomes' that may be far less benign than expected. This is a wonderful game illustrating the point. See more on school choice here.