Information, Preferences, and Household Demand for School Value Added
This paper examines the roles that information and preferences play in determining whether households choose schools with high value added. We study Romanian school markets using administrative data, a survey, and an experiment. The administrative data show that, on average, households could select schools with 1 s.d. worth of additional value added. This may reflect that households have incorrect beliefs about schools’ value added, or that their preferences lead them to prioritize other school traits. We elicit households’ beliefs and find that they explain less than a fifth of the variation in value added. We then inform randomly selected households about the value added of the schools in their towns. This improves the accuracy of households’ beliefs and leads low-achieving students to attend higher-value added schools. We next estimate households’ preferences and predict their choices under the counterfactual of fully accurate beliefs. We find that beliefs account for 18 (11) percent of the value added that households with low- (high-) achieving children leave unexploited. Interestingly, for households with low-achieving children, the experiment seems to have affected both beliefs and preferences. This generates larger effects on choices than would be predicted via impacts on beliefs alone.
For useful comments we thank Matt Backus, Peter Bergman, Michael Best, Sarah Cohodes, David Figlio, Dong Woo Hahm, Douglas Harris, Caroline Hoxby, Kirabo Jackson, Francisco Martorell, Karthik Muralidharan, Suresh Naidu, Christopher Neilson, Daniele Paserman, Jonah Rockoff, Richard Romano, Doug Staiger, and seminar participants at the NBER Summer Institute, APPAM, Princeton, the University of Florida, European University Institute, Bocconi, Nottingham, and UC Davis. We especially thank Miikka Rokkanen for early contributions to this project. For financial support, we are grateful to the Center for Development Economics and Policy (CDEP) and the Faculty Grants Program at SIPA (Columbia), to New York University, and to the KDI School of Public Policy and Management. This RCT was registered in the American Economic Association Registry for randomized control trials under trial number AEARCTR-0004496. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.