Working Paper: NBER ID: w21525
Authors: Christopher Avery; Parag A. Pathak
Abstract: School choice systems aspire to delink residential location and school assignments by allowing children to apply to schools outside of their neighborhood. However, the introduction of choice programs affect incentives to live in certain neighborhoods, which may undermine the goals of choice programs. We investigate this possibility by developing a model of public school and residential choice. We consider two variants, one with an exogenous outside option and one endogenizing the outside option by considering interactions between two adjacent towns. In both cases, school choice rules narrow the range between the highest and lowest quality schools compared to neighborhood assignment rules, and these changes in school quality are capitalized into equilibrium housing prices. This compressed distribution generates incentives for both the highest and lowest types to move out of cities with school choice, typically producing worse outcomes for low types than neighborhood assignment rules. Paradoxically, even when choice results in improvement in the worst performing schools, the lowest type residents may not benefit.
Keywords: school choice; residential choice; housing prices; educational equity
JEL Codes: H44; I20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| School choice programs (I28) | Narrowing of school quality (I24) |
| Narrowing of school quality (I24) | Changes in housing prices (R31) |
| Changes in housing prices (R31) | Changes in residential patterns (R23) |
| Narrowing of school quality (I24) | Incentives for high and low types to leave towns (H73) |
| Incentives for high and low types to leave towns (H73) | Worse outcomes for low types (I12) |
| School choice programs (I28) | Segregation by wealth (D31) |
| School choice programs (I28) | Changes in educational outcomes for low types (I24) |