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All about priorities: no school choice under the presence of bad schools

Joint with Antonio Miralles

Abstract: When school choice is implemented it is often implied that parents' preferences will affect the school their children attend. The matching literature in school choice shows how the design of the norms that govern the allocation process can have different desirable properties but that no unique mechanism has them all. The literature has ignored a crucial aspect in this process, which is the importance of the priorities that the administration give for the different schools in determining the final allocation. We show that if all individuals agree on what the worse schools are, the two most debated mechanisms, the Boston mechanism and the Gale Shapley (DA), will provide an allocation that fully corresponds to those priorities independently of families' listed preferences. Top Trading Cycles, a third proposal presented in the literature but not implemented yet, improves upon the allocation determined by priorities and therefore is the only responding to parents' preferences. Another interpretation of the results is that if the authorities have some preferences over where families should go to school they can implement them fully through setting priorities accordingly and choosing the Boston or DA mechanisms, which are the two most commonly used mechanisms.

[Paper in PDF]

Joint with Maia Guell

Abstract: School choice has been one of the most widely used and discussed policy in education. Children were usually assigned to the closest school from their homes. But in the last decades new rules have been implemented and parents have been asked about their preferences for schools to assign their children accordingly. An array of studies have looked at the impact of choice on outcomes in educations. A recent and important literature on the mechanism design problem of school choice has shown that under the so-called Boston mechanism parents may not have incentives to provide their true preferences, but the theory remains silent as to what parents should do in equilibrium. We use a change in the neighborhood design in Barcelona, where the Boston mechanism is used, to show that parents choose from the schools they have highest priority for, the neighborhood schools, excluding any other school they prefer from their submitted list. This implies that the Boston mechanism, under the presence of priorities, performs poorly in terms of assigning children according to preferences. This result has important implications for the emprical literature evaluating the effect of school choice on outcomes, such as in Lavy (2010) or Hastings, Kane and Steiger (2008), where this mechanism is governing choice.

[Paper in PDF]

Joint with Oliver Bunn and Donald Brown

Abstract: We conduct two experiments where subjects make a sequence of binary choices between risky and ambiguous binary lotteries. Risky lotteries are defined as lotteries where the relative frequencies of outcomes are known. Ambiguous lotteries are lotteries where the relative frequencies of outcomes are not known or may not exist. The trials in each experiment are divided into three phases: pre-treatment, treatment and post-treatment. The trials in the pre-treatment and post-treatment phases are the same. As such, the trials before and after the treatment phase are dependent, clustered matched-pairs, that we analyze with the alternating logistic regression (ALR) package in SAS. In both experiments, we reveal to each subject the outcomes of her actual and counterfactual choices in the treatment phase. The treatments differ in the complexity of the random process used to generate the relative frequencies of the payoffs of the ambiguous lotteries. In the first experiment, the probabilities can be inferred from the converging sample averages of the observed actual and counterfactual outcomes of the ambiguous lotteries. In the second experiment the sample averages do not converge. If we define fictive learning in an experiment as statistically significant changes in the responses of subjects before and after the treatment phase of an experiment, then we expect fictive learning in the first experiment, but no fictive learning in the second experiment. The surprising finding in this paper is the presence of fictive learning in the second experiment. We attribute this counterintuitive result to apophenia: “seeing meaningful patterns in meaningless or random data.” A refinement of this result is the inference from a subsequent Chi-squared test, that the effects of fictive learning in the first experiment are significantly different from the effects of fictive learning in the second experiment.

[Paper in PDF]

Joint with Ghazala Azmat and Nagore Iriberri

Abstract: The Ants and the Grasshoppers: Gender Gaps in Grades Using Different Evaluation Methods Abstract: The persistent gender gap in earnings and other labor market outcomes remains largely a puzzle. This gap is often prevalent over different age groups and even amongst the high-skilled. Understanding the determinants of the gender gaps in the formative stages is likely to be essential to address these issues. The observed gender gaps in education often show that girls outperform boys in all stages of school but in aptitude and achievement exams, which determine in great deal their entry to university, the advantage disappears and, eventually, it is reversed in the labor market. In this paper, we study the different evaluation elements of a prestigious private school that attracts students from highly educated families in which we would expect these gaps to be attenuated. The results shed light in explaining gender gaps in high school performance. Using a large panel of students over six years of secondary and high school, we study the gender gaps in four different types of assessments, including national level exams. We find that girls outperform boys overall but the gaps are larger in assessments that are low-stakes and low-pressure, that is, under continuous evaluation. In the national exams, where the impact of grades on university entry and future professional outcomes is maximal, the gap disappears.

Joint with Guillaume Haeringer and Flip Klijn

Journal of Economic Theory Volume 146, Number 1, January 2011

Abstract: We show that one of the main results in Chen and Sonmez (J. Econ. Th., 2006, 2008) does no longer hold when the number of recombinations is sufficiently increased to obtain reliable conclusions. No school choice mechanism is significantly superior in terms of efficiency.

[Paper in PDF]

Joint with Guillaume Haeringer and Flip Klijn

American Economic Review Volume 100, Number 4, September 2011

Abstract: The literature on school choice assumes that families can submit a preference list over all the schools they want to be assigned to. However, in many real-life instances families are only allowed to submit a list containing a limited number of schools. Subjects' incentives are drastically affected, as more individuals manipulate their preferences. Including a safety school in the constrained list explains most manipulations. Competitiveness across schools play an important role. Constraining choices increases segregation and affects the stability and efficiency of the final allocation. Remarkably, the constraint reduces significantly the proportion of subjects playing a dominated strategy.

[Paper in PDF]

Decentralizing Equality of Opportunity

International Economic Review Volume 50, Number 1, February 2009

Abstract: In a global justice problem, equality of opportunity is satisfied if individual well-being is independent of exogenous irrelevant characteristics. Policymakers, however, address questions involving local justice problems. We interpret a collection of local justice problems as the decentralized global justice problem. We show that controlling for effort locally, which is not required by the global justice objective, is sufficient for decentralizing equality of opportunity. Moreover, under some conditions, equalizing rewards to effort is not only sufficient but necessary. This implies in particular that most affirmative action policies may not contribute to providing equality of opportunity since they do not control for effort.

[Paper in PDF]

Joint with Donald J. Brown

Economic Theory Volume 31, Number 1, April 2007

Abstract: Changes in total surplus are traditional measures of economic welfare. We propose necessary and sufficient conditions for rationalizing individual and aggregate consumer demand data with individual quasilinear and homothetic utility functions. Under these conditions, consumer surplus is a valid measure of consumer welfare. For nonmarketed goods, we propose necessary and sufficient conditions on input market data for efficient production, i.e. production at minimum cost. Under these conditions we derive a cost function for the nonmarketed good, where producer surplus is the area above the marginal cost curve.

[Paper in PDF]

Cowles Foundation Discussion Paper #1507, Cowles Foundation for Research in Economics, Yale University.

Joint with Donald J. Brown

Abstract: A demand function derives from maximizing a quasilinear concave utility function subject to a budget constraint if and only if the demand function is cyclically monotone. On finite data sets consisting of pairs of market prices and consumption vectors, this result is equivalent to a solution of the Afriat inequalities where all the marginal utilities of income are equal. We explore refutable implications of these results for Bewley's Marshallian reformulation of Friedman's Walrasian model of the permanent income hypothesis.

[Paper in PDF]

Cowles Foundation Discussion Paper #1399, Cowles Foundation for Research in Economics, Yale University.

Joint with Donald J. Brown

Abstract: In the empirical and theoretical literature a consumer's utility function is often assumed to be quasilinear. In this paper we provide necessary and sufficient conditions for testing if the consumer acts as if she is maximizing a quasilinear utility function over her budget set. If the consumer's choices are inconsistent with maximizing a quasilinear utility function over her budget set, then we compute the "best" quasilinear rationalization of her choices.

[Paper in PDF]

Cowles Foundation Discussion Paper #1399R, Cowles Foundation for Research in Economics, Yale University.