Social Interactions and Preferences for Schools: Experimental Evidence from Los Angeles
Campos, Christopher
Unlike conventional markets, the notion of quality in education markets is vastly more ambiguous and challenging to observe. In addition, there is a considerable amount of debate surrounding the margins of quality that govern how parents select schools, and in a setting with imperfect information, parents may resort to other parents’ private signals to make decisions. Therefore, inadequate information, preferences, and social interactions may each play different roles in distorting school incentives. I design an information provision experiment that allows me to study these various factors among parents making schooling decisions in Los Angeles. To study relative preferences for school and peer quality, I cross-randomize two margins of information, and to study social interactions, I use a spillover design that allows me to detect treatment effects for untreated parents in treated schools. I find that receiving information on either quality margin changes parents’ decisions, suggesting parents are imperfectly informed about both. I then show that social interactions are prevalent, generating treatment effects for untreated parents in treated schools similar to treated parents. The social interactions are sufficiently large to generate market-level consensuses uniformly moving demand toward higher value-added schools coupled with a systematic shift toward schools with lower quality peers. These findings suggest that when parents are perfectly informed about both school and peer quality, parental interactions are essential for interpreting the information and that demand moves in a way consistent with parents rewarding effective schools, providing schools incentives that are more aligned with improving student learning. The experiment ran again in Fall 2021 and results for the second iteration are forthcoming.