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 total applications and more applications from higher achieving students, but 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, creating both advantages and disadvantages for labelled organizations. We identify and evaluate various mechanisms by which these outcomes arise.