Papers

Why do households leave school value added on the table? The roles of information and preferences  

(with Robert Ainsworth, Rajeev Dehejia, Cristian Pop-Eleches), American Economic Review, 2023. Paper.

Abstract: Romanian households could choose schools with 1 s.d. additional value added. Why do households leave value added “on the table”? We study two possibilities: information and preferences for other school traits. In an experiment, we inform randomly selected households about schools’ value added. These households choose schools with between 0.05 and 0.2 s.d. of additional value added. We then estimate a discrete choice model and show that households have strong preferences for peer quality and curriculum in addition to value added, implying that even perfect information would eliminate at most a quarter of the value added that households leave unexploited.   

 

Interactions between family and school environments: Access to abortion and selective schools

(with Leonard Goff, Ofer Malamud, Cristian Pop-Eleches), Journal of Human Resources, forthcoming. Paper.

Abstract: We use Romanian data to ask whether the benefit of access to better schools is larger for children who experienced better family environments because their parents had access to abortion. We combine regression discontinuity and difference-in-differences designs to estimate impacts on a high-stakes school-leaving exam. We find that access to abortion and access to better schools each have positive impacts, but find no consistent evidence of interactions between these impacts. To the extent a pattern emerges, it suggests substitutability rather than complementarity between family and school environments.

 

Why does the United States have the best research universities? Incentives, resources, and virtuous circles  

(with Bentley MacLeod), Journal of Economic Perspectives, 2021. Paper.

Abstract: Around 1875 the U.S. had none of the world’s leading research universities; today, it accounts for the majority of the top-ranked. Many observers cite events surrounding World War II as the source of this reversal. We present evidence that U.S. research universities had surpassed most countries’ decades before WWII. An explanation of their dominance must therefore begin earlier. The one we offer highlights reforms that began after the Civil War and enhanced the incentives and resources the system directs at research. Our story is not one of success by design, but rather of competition leading American colleges to begin to care about research. We draw on agency theory to argue that this led to increasing academic specialization, and in turn, to more precise measures of professors’ research output. Combined with sorting dynamics that concentrated talent and resources at some schools—and the emergence of tenure—this enhanced research performance.

 

Is education consumption or investment?  Implications for the effect of school competition  

(with Bentley MacLeod), Annual Review of Economics, 2019. Paper.

Abstract: Milton Friedman argued that giving parents freedom to choose schools would improve education. His argument was simple and compelling because it extended results from markets for consumer goods to education. We review the evidence, which yields surprisingly mixed results on Friedman’s prediction. A key reason is that households often seem to choose schools based on their absolute achievement rather than their value added. We show that this can be rational in a model based on three ingredients that economists have highlighted since Friedman worked on the issue. First, education is an investment into human capital. Second, labor markets can feature wage premia: Individuals of a given skill level may receive higher wages if they match to more productive firms. Third, distance influences school choice and the placements that schools produce. These factors imply that choice alone is too crude a mechanism to ensure the effective provision of schooling.

 

The big sort: College reputation and labor market outcomes

(with Bentley MacLeod, Evan Riehl, and Juan Saavedra), American Economic Journal: Applied Economics, 2017. Paper, Video research highlight.

Abstract: We explore how college reputation affects the “big sort,” the process by which students choose colleges and find their first jobs. We incorporate a simple definition of college reputation—graduates’ mean admission scores—into a competitive labor market model. This generates a clear prediction: if employers use reputation to set wages, then the introduction of a new measure of individual skill will decrease the return to reputation. Administrative data and a natural experiment from the country of Colombia confirm this. Finally, we show that college reputation is positively correlated with graduates’ earnings growth, suggesting that reputation matters beyond signaling individual skill.

 

School vouchers:  A survey of the economics literature

(with Dennis Epple and Richard Romano), Journal of Economic Literature, 2017. Paper.

Abstract: We review the theoretical, computational, and empirical research on school vouchers, with a focus on the latter. Our assessment is that the evidence to date is not sufficient to warrant recommending that vouchers be adopted on a widespread basis; however, multiple positive findings support continued exploration. Specifically, the empirical research on small-scale programs does not suggest that awarding students a voucher is a systematically reliable way to improve educational outcomes, and some detrimental effects have been found. Nevertheless, in some settings, or for some subgroups or outcomes, vouchers can have a substantial positive effect on those who use them. Studies of large-scale voucher programs find student sorting as a result of their implementation, although of varying magnitude. Evidence on both small-scale and largescale programs suggests that competition induced by vouchers leads public schools to improve. Moreover, research is making progress on understanding how vouchers may be designed to limit adverse effects from sorting, while preserving positive effects related to competition. Finally, our sense is that work originating in a single case (e.g., a given country) or in a single research approach (e.g., experimental designs) will not provide a full understanding of voucher effects; fairly wide-ranging empirical and theoretical work will be necessary to make progress.

Competition among schools: Traditional and private schools

Handbook of the Economics of Education, 2016. Paper,

Abstract: This chapter considers research on the effects of competition between private and public schools. It focuses on three questions: (1) Do children experience higher achievement gains in private school? (2) If so, is this because private schools are more productive? (3) Does competition from private schools raise public school productivity and/or otherwise affect those “left behind”? The chapter shows that unless
each of these questions is answered, one cannot form a full assessment on the desirability of private school entry. Voucher experiments suggest that question 1 can be answered in the affirmative for some subgroups and in some contexts. Such work cannot typically isolate channels, however, and hence does not address question 2. Question 3 has been primarily studied by papers on large-scale voucher programs. These suggest that private school entry results in nonrandom sorting of students, but are less clear on the effects. The bottom line is that despite demand for clear, simple conclusions on the effects of competition from private schools, research does not yet provide these.

 

Reputation and school competition

(with Bentley MacLeod), American Economic Review, 2015. Paper.

Abstract: Stratification is a distinctive feature of competitive education markets that can be explained by a preference for good peers. Learning externalities can lead students to care about the ability of their peers, resulting in across-school sorting by ability. This paper shows that a preference for good peers, and therefore stratification, can also emerge endogenously from reputational concerns that arise when graduates use their college of origin to signal their ability. Reputational concerns can also explain puzzling observed trends including the increase in student investment into admissions exam preparation, and the decline in study time at college. 

Going to a better school: Effects and behavioral responses

(with Cristian Pop-Eleches) American Economic Review, 2013. Paper. 

Abstract: This paper applies a regression discontinuity design to the Romanian secondary school system, generating two findings. First, students who have access to higher achievement schools perform better in a (high stakes) graduation test. Second, the stratification of schools by quality in general, and the opportunity to attend a better school in particular, result in significant behavioral responses: (i) teachers sort in a manner consistent with a preference for higher achieving students; (ii) children who make it into more selective schools realize they are relatively weaker and feel marginalized; (iii) parents reduce effort when their children attend a better school.

 

School markets:  The impact of information on school effectiveness
(with Alejandra Mizala), Journal of Development Economics, 2013. Paper.
Abstract: The impact of competition on school performance is likely to depend on whether parents are informed about schools’ effectiveness or value added (which may or may not be correlated with absolute measures of their quality), and on whether this information influences their school choices, thereby affecting schools’ market outcomes. This paper explores this by considering Chile’s SNED program, which seeks to identify effective schools, selecting them from “homogeneous groups” of comparable institutions. Its results are widely disseminated, and the information it generates is different from that conveyed by a simple test-based ranking of schools (which turns out to approximate a ranking based on socioeconomic status). We use a sharp regression discontinuity to estimate the effect that being identified as a SNED winner has on schools’ enrollment, tuition levels, and socioeconomic composition. Through five applications of the program, we find no consistent evidence that winning a SNED award affects these outcomes.

 

Competition and educational productivity:  Incentives writ large 
(with W. Bentley MacLeod) in P. Glewwe, Ed., Education policy in developing countries, 2013. Paper.

Abstract: Friedman (1962) suggested that in general, unfettered markets ensure the efficient provision of goods and services. Applying this logic to Education, he recommended that students be provided with vouchers and allowed to purchase schooling services in a free market ((Friedman (1955, 1962)). Hoxby (2002) refines this argument and suggests that more choice will lead to higher school productivity. We discuss the evidence in this area, concluding that the impact of competition has proven to be more mixed and modest than expected. We suggest that this in fact should not be surprising, since economic theory on incentives and incomplete contracts (beginning with many contributions also from the 1950s) leads to a more nuanced expectation. Specifically, an examination of the incentives faced by schools, parents, and students leads to predictions that are broadly consistent with the evidence, and suggests that there is no a priori reason to believe that school choice will dramatically improve test scores. We describe a simple model that illustrates this point and further implies that elements of market design might be necessary to ensure that competition enhances educational performance.

 

Class size caps, sorting, and the regression discontinuity design
(with Eric Verhoogen)  American Economic Review, 2009. Paper.

This paper examines how schools’ choices of class size and households’ choices of schools affect regression-discontinuity-based estimates of the effect of class size on student outcomes. We build a model in which schools are subject to a class-size cap and an integer constraint on the number of classrooms, and higher-income households sort into higher-quality schools. The key prediction, borne out in data from Chile’s liberalized education market, is that schools at the class-size cap adjust prices (or enrollments) to avoid adding an additional classroom, which generates discontinuities in the relationship between enrollment and household characteristics, violating the assumptions underlying regression-discontinuity research designs.

 

Socioeconomic status or noise?  Tradeoffs in the generation of school quality information
(with Alejandra Mizala and Pilar Romaguera)    Journal of Development Economics, 2007. Paper.

This paper calculates a time series of simple, standard measures of schools’ relative performance. These
are drawn from a 1997–2004 panel of Chilean schools, using individual-level information on test scores
and student characteristics for each year. The results suggest there is a stark tradeoff in the extent to which
rankings generated using these measures: i) can be shown to be very similar to rankings based purely on
students’ socioeconomic status, and ii) are very volatile from year to year. At least in Chile, therefore,
producing a meaningful ranking of schools that may inform parents and policymakers may be harder than is
commonly assumed.

 

Apples and oranges: Educational attainment in Latin America and the Caribbean
(with Valentina Calderon), International Journal of Educational Development, 2006. Paper.

 

The effects of generalized school choice on achievement and stratification: Evidence from Chile’s school voucher program
(with Chang-Tai Hsieh) Journal of Public Economics, 2006, Paper.  Earlier NBER version.

In 1981, Chile introduced nationwide school choice by providing vouchers to any student wishing to attend private school. As a result, more than 1000 private schools entered the market, and the private enrollment rate increased by 20 percentage points, with greater impacts in larger, more urban, and wealthier communities. We use this differential impact to measure the effects of unrestricted choice on educational outcomes. Using panel data for about 150 municipalities, we find no evidence that choice improved average educational outcomes as measured by test scores, repetition rates, and years of schooling. However, we find evidence that the voucher program led to increased sorting, as the “best” public school students left for the private sector. 

 

Identifying class size effects in developing countries:  Evidence from rural Bolivia,

Review of Economics and Statistics, 88(1), 171-177, 2006. Paper.

This note implements two research designs that attempt to isolate the effect of class size on achievement. A first strategy focuses on variation in class size in rural schools with fewer than 30 students, and hence only one classroom, per grade. Second, an approach similar to Angrist and Lavy’s exploits regulations that allow schools with more than 30 students in a given grade to obtain an additional teacher. Both designs
suggest class size negatively affects test scores.

 

Does school choice lead to sorting? Evidence from Tiebout variation

 American Economic Review, 95(4), 1310-1326, 2005. Paper.

    

The central role of noise in evaluating interventions that use test scores to rank schools

(with Kenneth Chay and Patrick McEwan), American Economic Review, 2005. Paper.

Many programs reward or penalize schools based on students’ average performance. Mean reversion is a potentially serious hindrance to the evaluation of such interventions. Chile’s 900 Schools Program (P-900) allocated resources based on cutoffs in schools’ mean test scores. This paper shows that transitory noise in average scores and mean reversion lead conventional estimation approaches to overstate the impacts of such programs. It further shows how a regression-discontinuity design can be used to control for reversion biases. It concludes that P-900 had significant effects on test score gains, albeit much smaller than is widely believed.