Association for Public Policy Analysis & Management

This study asks whether lack of information about ability helps explain why high-performing students from disadvantaged backgrounds tend to under-invest in their education. I examine an individualized signal of aptitude for Advanced Placement known as “AP Potential” that is provided in PSAT reports. By collecting high-frequency panel data on subjective beliefs from students in Oakland, California, I show that the AP Potential signal has informational value: students with the same scores and prior beliefs who receive the signal experience larger information shocks. These shocks lead students to revise their beliefs about their ability, the number of AP classes they plan to take, and the likelihood that they will attend a four-year college, consistent with a Bayesian updating model. I then exploit the deterministic relationship between test scores and the AP Potential signal in a Regression Discontinuity (RD) design and find that receiving the signal caused surveyed students at the margin to enroll in approximately one more AP class the following semester. This effect amounts to raising the number of high-ability students in college-level courses and reducing mismatch in course enrollments. The results suggest that providing a credible, individualized signal of ability is a cost-effective means of increasing human capital investments among disadvantaged students