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ERIC Number: ED501939
Record Type: Non-Journal
Publication Date: 2007-Aug
Pages: N/A
Abstractor: As Provided
Reference Count: N/A
ISBN: N/A
ISSN: N/A
Class Size and Sorting in Market Equilibrium: Theory and Evidence. NBER Working Paper No. 13303
Urquiola, Miguel; Verhoogen, Eric
National Bureau of Economic Research
This paper examines how schools choose class size and how households sort in response to those choices. Focusing on the highly liberalized Chilean education market, we develop a model in which schools are heterogeneous in an underlying productivity parameter, class size is a component of school quality, households are heterogeneous in income and hence willingness to pay for school quality, and schools are subject to a class-size cap. The model offers an explanation for two distinct empirical patterns observed among private schools that accept government vouchers: (i) There is an inverted-U relationship between class size and household income in equilibrium, which will tend to bias cross-sectional estimates of the effect of class size on student performance. (ii) Some schools at the class size cap adjust prices (or enrollments) to avoid adding another classroom, which produces stacking at enrollments that are multiples of the class size cap. This generates discontinuities in the relationship between enrollment and household characteristics at those points, violating the assumptions underlying regression-discontinuity (RD) research designs. This result suggests that caution is warranted in applying the RD approach in settings in which parents have substantial school choice and schools are free to set prices and influence their enrollments.
National Bureau of Economic Research. 1050 Massachusetts Avenue, Cambridge, MA 02138-5398. Tel: 617-588-0343; Web site: http://www.nber.org/cgi-bin/get_bars.pl?bar=pub
Publication Type: Reports - Descriptive
Education Level: Elementary Secondary Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: National Bureau of Economic Research, Cambridge, MA.
Identifiers - Location: Chile