Distorted Quality Signals in School Markets
76 Pages Posted: 25 Mar 2017 Last revised: 22 Jun 2020
Date Written: June 1, 2020
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: Suggested Citation