Association for Public Policy Analysis & Management

Spatial inequality in local public education leads to parents’ simultaneous choices of residence and school, which contributes to educational sorting, i.e. the rich are assigned to better schools and vice versa. Policymakers, in response to the negative social implications of sorting, have made attempts to reduce disparities across school districts. Scholars have examined such reforms in the U.S. and the findings in general undergird their effectiveness in mitigating inter-district sorting. Not even a single study, however, has tracked similar policies in the Chinese context through the lens of sorting, and this research fills the gap. Moreover, this research draws on house-level data which, compared to oft-used district-level ones, more precisely locates the policy effect.

In China, local variations in public school quality have been rather pronounced especially in metropolises. This can date back to a policy in the mid-twentieth century which, in an effort to establish a set of elite schools with limited fiscal resources, heavily preferred a small proportion of schools. The variations coupled with enlarging gaps between housing values in the neighborhood of different schools did not elicit policy responses until in recent years. 

Beijing initiated a radical reform early in 2014 which aimed to equalize public primary school quality. The reform involves dozens of inferior primary schools by:

1. providing them with disproportionally more enrollment slots in elite junior high schools;
2. practicing school partnership and franchising between best-performing primary schools and them; or
3. merging them completely into prestigious primary schools.

Since each housing complex is strictly assigned to a single primary school, we define a school district as constituted by all complexes entitled to one school. The reform works as follows. First, a school announces its involvement in reform, which occurs in different times prior to June. Second, each school (including non-reformed ones) publishes at the end of May the list of housing complexes within its district, and accordingly enrolls students for the 2014-15 school year. We estimate the marginal effect of each step on inter-district sorting. Specifically, we focus on how the housing values of reformed districts changed relative to those of neighboring non-reformed ones after each step.

Using transaction records of second-hand houses and information of school districts in Beijing, we identify the problem by:

1. an adjusted difference-in-differences strategy, which captures the reform’s effect on linear time trends; and
2. an event study model, which estimates the effect in each month relative to the shock, respectively.

We find reduced sorting posterior to schools’ notice of reform, but no significant effect of revealing school district information. The results suggest that residents may gravitate to the reformed school districts early in the post-reform period but gradually return to rational, possibly owing to the time-consuming nature of any educational reform. For policymakers, this research provides evidence for the capacity of equalization policies to curtail educational sorting, on condition that the authorities release constant signals of actual effect.