Level-Based vs. Value-Added Quality Signals in Parental Demand
When participating in public school choice, parents require signals of academic quality, but calculated school value-added measures are complex, unobservable, and omitted from public reporting. Consequently, parents rely on observable status metrics like raw average test scores, aligning demand with peer composition rather than institutional productivity.
Picture this
Choosing a school based on test score levels rather than value-added is like judging a gym by how fit its current members look rather than how much weight an average person loses after joining. Fit members may simply have started in great shape, masking whether the gym's training program is actually effective.
What the evidence says
Exploded logit specifications using raw average test scores yielded the best fit to observed choices (-log likelihood = -42,570 for non-lunch white elementary), whereas models using estimated school value-added fit observed choices poorly (-log likelihood = -43,751), demonstrating that parental decisions are driven by achievement levels rather than gains.
- Who
- N = 36,887 human students in grades 4–8 across 2,342,254 choice pairs in Charlotte-Mecklenburg Schools, North Carolina.
- How
- Exploded multinomial logit demand estimation comparing model fit across four distinct quality proxies: baseline average test scores, current average test scores, historical average test scores, and regression-adjusted value-added fixed effects.
What to do
Publish regression-adjusted value-added metrics alongside raw test scores in official school report cards to shift parental demand toward institutional productivity.
From the source
"The value-added measure in panel 4 does not fit the observed choice data well at all. This may not be surprising since this statistic is not available to parents and is not easy to calculate given the available average score statistics."
Heterogeneous Preferences and the Efficacy of Public School Choice