Good Principals or Good Peers? Parental Valuation of School Characteristics, Tiebout Equilibrium, and the Effects of Inter-District Competition

School choice policies aim to improve school productivity by rewarding administrators of schools that parents prefer. Parental choice may not create incentives for effective administration if parents prefer schools with desirable peer groups to those with inferior peers but better policies and instruction. I examine families revealed preferences in Tiebout choice residential location markets for evidence on the importance of school effectiveness to parental choices. In a multicommunity-style model, wealthy parents cluster together in any Tiebout equilibrium, and cluster near effective schools if effectiveness is an important component of school desirability. Moreover, decentralization of educational governance choice among several local school districts facilitates this residential sorting. Thus, if parents strongly prefer effective schools, average income correlates with school effectiveness in high-choice-market equilibrium. I use a large sample of SAT-takers to examine the joint distribution of student background and outcomes across schools within metropolitan housing markets that differ in the structure of educational governance. I find strong evidence that choice facilitates residential sorting, but little evidence of the sorting that is predicted if parents choose neighborhoods for school characteristics other than peer groups. Moreover, average SAT scores are no higher in high-choice than in low-choice markets. These results suggest caution about the potential to induce improvements in educational productivity through expansions of parental choice.

[1]  R. Rothstein,et al.  School choice : examining the evidence , 1993 .

[2]  A Unified Framework for Measuring Preferences for Schools and Neighborhoods , 2003 .

[3]  William G. Howell,et al.  School Choice in New York City After Three Years: An Evaluation of the School Choice Scholarships Program , 2002 .

[4]  R. Eberts,et al.  Jurisdictional homogeneity and the Tiebout hypothesis , 1981 .

[5]  Paul E. Peterson,et al.  School Vouchers and Academic Performance: Results from Three Randomized Field Trials , 2002 .

[6]  S. Rosen,et al.  Discrimination in the market for public school teachers , 1975 .

[7]  Thomas D. Snyder,et al.  Digest of Education Statistics , 1994 .

[8]  Thomas J. Kane,et al.  The Promise and Pitfalls of Using Imprecise School Accountability Measures , 2002 .

[9]  Steven D. Levitt,et al.  The Impact of School Choice on Student Outcomes: An Analysis of the Chicago Public Schools , 2000 .

[10]  Greg J. Duncan,et al.  Family background, parenting practices, and the Black–White test score gap. , 1998 .

[11]  A. Krueger,et al.  Estimating the Payoff to Attending a More Selective College: An Application of Selection on Observables and Unobservables , 2002 .

[12]  M. Urquiola.  Demand Matters: School District Concentration, Composition, and Educational Expenditure , 2000 .

[13]  Felix Schlenk,et al.  Proof of Theorem 3 , 2005 .

[14]  C. Manski.  Identification of Endogenous Social Effects: The Reflection Problem , 1993 .

[15]  C. Belfield.  The Effects of Competition on Educational Outcomes , 2003 .

[16]  Sarah J. Reber.  Court-Ordered Desegregation , 2005, The Journal of Human Resources.

[17]  Dennis Epple,et al.  Ends against the middle: Determining public service provision when there are private alternatives , 1996 .

[18]  Stephen L. Ross,et al.  Chapter 47 Sorting and voting: A review of the literature on urban public finance , 1999 .

[19]  P. Bayer.  AN EQUILIBRIUM MODEL OF SORTING IN AN URBAN HOUSING MARKET: A Study of the Causes and Consequences of Residential Segregation , 2002 .

[20]  Edward L. Glaeser,et al.  The Rise and Decline of the American Ghetto , 1997, Journal of Political Economy.

[21]  R. Thornton,et al.  Concentration in the Labor Market for Public School Teachers , 1986 .

[22]  C. Rouse,et al.  Private School Vouchers and Student Achievement: An Evaluation of the Milwaukee Parental Choice Program , 1997 .

[23]  W. Evans,et al.  Measuring Peer Group Effects: A Study of Teenage Behavior , 1992, Journal of Political Economy.

[24]  Dennis Epple,et al.  Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes , 1998 .

[25]  Lars Lefgren,et al.  What Do Parents Value in Education? An Empirical Investigation of Parents' Revealed Preferences for Teachers , 2007 .

[26]  Jesse M. Rothstein.  Does Competition Among Public Schools Benefit Students and Taxpayers? A Comment on Hoxby (2000) , 2004 .

[27]  M. E. Lucas,et al.  What's in a Grade? School Report Cards and House Prices , 2000 .

[28]  T. Dee.  Competition and the quality of public schools , 1998 .

[29]  D. Epple,et al.  The Implications of Competition Among Jurisdictions: Does Tiebout Need Politics? , 1981, Journal of Political Economy.

[30]  Brian A. Cromwell,et al.  How Much is a Neighborhood School Worth , 2000 .

[31]  D. Epple,et al.  Existence of voting and housing equilibrium in a system of communities with property taxes , 1993 .

[32]  Dennis Epple,et al.  Estimating Equilibrium Models of Local Jurisdictions , 1998, Journal of Political Economy.

[33]  A. Krueger,et al.  Another Look at the New York City School Voucher Experiment , 2004 .

[34]  K. Taira.  Proof of Theorem 1.3 , 2004 .

[35]  Randall Reback.  Capitalization under School Choice Programs: Are the Winners Really the Losers? Occasional Paper. , 2002 .

[36]  David Card,et al.  School Finance Reform, the Distribution of School Spending, and the Distribution of Sat Scores , 1998 .

[37]  Bruce W. Hamilton.  Zoning and Property Taxation in a System of Local Governments , 1975 .

[38]  Lisa Barrow.  School choice through relocation: evidence from the Washington, D.C. area , 2002 .

[39]  D. Epple,et al.  Interjurisdictional Sorting and Majority Rule: An Empirical Analysis , 2001 .

[40]  Jesse Rothstein,et al.  College Performance Predictions and the SAT , 2004 .

[41]  Paul E. Peterson,et al.  Earning and Learning: How Schools Matter. , 1999 .

[42]  Richard Rogerson,et al.  Keeping People Out: Income Distribution, Zoning and the Quality of Public Education , 1993 .

[43]  Finis Welch,et al.  New evidence on school desegregation , 1987 .

[44]  Gene V. Glass,et al.  Politics, Markets, and America's Schools , 1990 .

[45]  D. H. Freeman.  Statistical Decomposition Analysis , 1974 .

[46]  G. Orfield.  Public School Desegregation in the United States, 1968-1980 , 1986 .

[47]  T. Nechyba.  Existence of equilibrium and stratification in local and hierarchical Tiebout economies with property taxes and voting , 1996 .

[48]  David Card,et al.  When financial work incentives pay for themselves: evidence from a randomized social experiment for welfare recipients , 2005 .

[49]  Stephen W. Raudenbush,et al.  The Estimation of School Effects , 1995 .

[50]  C. Hoxby,et al.  Peer Effects in the Classroom: Learning from Gender and Race Variation , 2000 .

[51]  D. Woodruff,et al.  The Shape of the River: Long-Term Consequences of Considering Race in College and University Admissions , 1998 .

[52]  Lowell J. Taylor,et al.  Why Do Gay Men Live in San Francisco , 2002 .

[53]  C. Belfield,et al.  The Effects of Competition Between Schools on Educational Outcomes: A Review for the United States , 2002 .

[54]  Charles M. Tiebout.  A Pure Theory of Local Expenditures , 1956, Journal of Political Economy.

[55]  W. Greene.  Sample Selection Bias as a Specification Error: Comment , 1981 .

[56]  Eric A. Hanushek,et al.  Throwing money at schools , 1981 .

[57]  M. Dynarski.  The Scholastic Aptitude Test: Participation and Performance. , 1987 .

[58]  Richard Rogerson,et al.  Income Distribution, Communities, and the Quality of Public Education , 1996 .

[59]  C. Hoxby,et al.  Appendices to : “ Does Competition among Public Schools Benefit Students and Taxpayers ? , 2004 .

[60]  J. Heckman.  Sample selection bias as a specification error , 1979 .

[61]  Thomas D. Snyder,et al.  Digest of Education Statistics 1997 , 1988 .

[62]  C. Mayer,et al.  Why do households without children support local public schools? Linking house price capitalization to school spending , 2002 .

[63]  Kevin M. Murphy,et al.  Estimation and Inference in Two-Step Econometric Models , 1985 .

[64]  John F. Kain,et al.  New Evidence About Brown V. Board of Education: The Complex Effects of School Racial Composition on Achievement , 2002 .

[65]  Thomas J. Kane,et al.  School Quality, Neighborhoods and Housing Prices: The Impacts of School Desegregation , 2005 .

[66]  J. Buchanan,et al.  The power to tax : analytical foundations of a fiscal constitution , 1981 .

[67]  H. James.  VARIETIES OF SELECTION BIAS , 1990 .

[68]  Thomas Romer,et al.  Mobility and Redistribution , 1991, Journal of Political Economy.

[69]  C. Hoxby,et al.  Do Private Schools Provide Competition for Public Schools? , 1994 .

[70]  J. Douglas Willms,et al.  Alert and inert clients: The Scottish experience of parental choice of schools , 1992 .

[71]  Anthony S. Bryk,et al.  Hierarchical Linear Models: Applications and Data Analysis Methods , 1992 .

[72]  D. Epple.  Searching for Leviathan : An Empirical Study , 1995 .

[73]  L. Kenny,et al.  The decline in the number of school districts in the U.S.: 1950–1980 , 1994 .

[74]  G. Kézdi.  Robust Standard Error Estimation in Fixed-Effects Panel Models , 2003 .

[75]  M. Urquiola.  Does School Choice Lead to Sorting? Evidence from Tiebout Variation , 2005 .

[76]  Sandra E. Black.  Do better schools matter? Parental valuation of elementary education , 1999 .

[77]  Thomas J. Kane,et al.  School Accountability Ratings and Housing Values , 2003 .

[78]  M. Borland,et al.  Student academic achievement and the degree of market concentration in education , 1992 .

[79]  A. Hirschman,et al.  Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States , 1971 .

[80]  M. E. Lucas,et al.  What's in a Grade? School Report Cards and the Housing Market , 2004 .

[81]  Margaret E. Raymond,et al.  The Confusing World of Educational Accountability , 2001, National Tax Journal.

[82]  Robert McMillan,et al.  An Equilibrium Model of Sorting in an Urban Housing Market: The Causes and Consequences of Residential Segregation , 2003 .

[83]  Eric A. Hanushek,et al.  The Economics of Schooling: Production and Efficiency in Public Schools , 1986 .