Association for Public Policy Analysis & Management

Recent years have seen increasing interest in incorporating quasi-market approaches to providing social services. While policymakers often motivate these approaches by arguing that they increase equality of access to services, some recent evidence suggests that they can in fact exacerbate inequalities by labeling and stigmatizing struggling organizations, creating a cumulative disadvantage process that prevents organizations from improving. We focus on the case of high school choice in New York City, and explore the impacts of the “School Renewal Program,” which both identified schools as struggling and provided them with additional supports and resources, on student application behavior. Using a difference-in-differences design, we find that once schools were labelled as “Renewal,” they attracted more applications relative to comparison schools, but on average those applications were ranked lower than they would have been absent the Renewal label. This finding suggests that the effect of “mixed signal” labels is not straightforward. Future versions of this paper will explore mechanisms through which the outcomes we identify arise, and implications for informational systems in the context of public choice.