The Demand for Effective Charter Schools
This paper uses a structural model of school choice and academic achievement to study the demand for charter schools in Boston, Massachusetts, with an emphasis on comparative advantage in school choice. I combine an optimal portfolio choice framework describing charter school application and attendance decisions with a generalized Roy selection model linking student preferences to the achievement gains generated by charter attendance. The model is estimated using instruments derived from randomized entrance lotteries and distance to charter schools. The results show that charter schools reduce achievement gaps between high- and low-achieving groups, so poorer, lower-achieving students have a comparative advantage in the charter sector. Higher-income students and students with high prior test scores have stronger demand for charter schools, however, implying that preferences for charters are inversely related to potential achievement gains. The structural estimates show a similar pattern of selection on unobservables: test score gains are smaller for students with stronger unobserved tastes for charter schools. This “reverse Roy” selection pattern implies that students do not sort into charter schools on the basis of comparative advantage in academic achievement; instead, potential achievement gains are larger for students who choose not to apply to charter schools. These results are consistent with the possibility that high-performing charter schools partially compensate for differences in human capital investments across families, but motivated parents who invest more at home are also more likely to seek out seats at effective schools. Simulations of an equilibrium school choice model indicate that efforts to target students who are unlikely to apply could substantially boost the effects of charter school expansion.
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This paper was revised on January 26, 2016
Document Object Identifier (DOI): 10.3386/w20640
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