Distorted Quality Signals in School Markets

76 Pages Posted: 25 Mar 2017 Last revised: 22 Jun 2020

See all articles by José Ignacio Cuesta

José Ignacio Cuesta

Stanford University, Department of Economics

Felipe González

Pontifical Catholic University of Chile - Institute of Economics

Cristian Larroulet Philippi

CU Boulder, Philosophy Department

Date Written: June 1, 2020

Abstract

Information plays a key role in markets with consumer choice. In education, data on schools is often gathered through standardized testing. However, the use of these tests has been controversial because of distortions in the metric itself. We study the Chilean educational market and document that low-performing students are underrepresented in test days, generating distortions in school quality information. These distorted quality signals affect parents’ school choice and induce misallocation of public programs. These results provide novel evidence for the costs that distortions in quality signals generated by standardized tests in accountability systems impose on educational markets.

Keywords: accountability, schools, quality, disclosure, competition, choice

JEL Classification: I20, L15

Suggested Citation

Cuesta, José Ignacio and González, Felipe and Larroulet Philippi, Cristian, Distorted Quality Signals in School Markets (June 1, 2020). Available at SSRN: https://ssrn.com/abstract=2939293 or http://dx.doi.org/10.2139/ssrn.2939293

José Ignacio Cuesta

Stanford University, Department of Economics ( email )

579 Jane Stanford Way
Stanford, CA CA 94305
United States
94305-6015 (Fax)

Felipe González (Contact Author)

Pontifical Catholic University of Chile - Institute of Economics ( email )

Casilla 76
Correo 17
Santiago
Chile

Cristian Larroulet Philippi

CU Boulder, Philosophy Department ( email )

United States

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