Association for Public Policy Analysis & Management

The growth in school choice as well as the use of lotteries to assign spaces in oversubscribed schools generates a popular methodology to estimate the benefits of better schools on a variety of outcomes. Past scholars have found substantial benefits from winning access to a better quality school on academic achievement, antisocial behavior and college attendance. Typically, lottery studies focus on showing the gain in school quality for winners by comparing the school quality, typically measured using end-of-grade test scores, of winner and losers. In practice, losers may compensate for losing by opting out of the public school system, obtaining after hours tutoring, attending a magnet school or relocating to another neighborhood with a higher quality home school. This school choice lottery literature has paid relatively little attention to the behavior of losers and thus may be understating the actual benefits of winning school choice lotteries since losers may have paid to increase their school quality through supplemental education, private school tuition, or higher home prices.

The research presented here examines what happens after a family loses the school choice lottery. Our focus is primarily on residential relocation and opting out of the public school system in response to the results of a school choice lottery. We incorporate previously used administrative data on the public school choice lottery in Charlotte, NC to first show that conditional on lottery rules, winner and losers are similar on student attributes indicating that winners and losers are observationally equivalent. We then provide results that show that rising kindergarten and sixth grade students who lose the school choice lottery are about 5 percentage points more likely to exit the district or change neighborhood schools, which represents an increase of about 30% over baseline moving probabilities. Students who lost the lottery and change neighborhood schools make up 0.10 - 0.14 standard deviations in average school test scores between lottery assignment and attendance the following year. Using hedonic-based estimate of land prices, we estimate a willingness to pay of about 9% in housing prices for the 0.1 - 0.14 standard deviation gain in school average test scores.

Results have important policy implications for school choice lotteries. First, evaluation of the benefits of school choice lotteries should account for the ability of losers to compensate through residential relocation and thus simply comparing the school quality and outcomes of winners and losers may underestimate potential benefits. Second, results provide new estimates of the value of school quality using a new methodology as well as for a population of students that likely has a larger value for school quality.