Biased Beliefs and Search in Education Markets

2018-07-26

2018-08-25

The primary outcomes of this study are the results from the parent’s search decision: the consideration set and the school choice. The standard search model predicts that parents search less if they underestimate the utility of schools that are not in their consideration set. Thus, we hypothesize that correcting their beliefs may encourage parents to search more and result in a larger consideration set and a better school choice. We also hypothesize that households in the second treatment may send their children to better schools than households in the control group. However, we are ambivalent on the effect of the second treatment on the consideration set. While the additional information in the brochure should increase the parent's passive knowledge of schools, we are only able to collect the names of the schools that parents actively report in the survey. This might be different from their passive knowledge if parents only remember to report the schools for which they have actively searched.

The measures of knowledge and school choice may include the following:

Knowledge:
- Number of schools that the parent knows
- Number of schools in the neighborhood that the parent knows
- Average quality, price, school day duration, and distance of the schools that the parent knows

Choice:
- The attributes of the school in which the parent enrolls the child. In particular, we will focus on quality, price, school day duration, and distance of the school.

These main outcomes might be used as moments in the model estimation. We are still working on the empirical version and estimation procedure, but the main idea is that the model should replicate the difference between knowledge outcomes of families in the first treatment arm and the control group and the difference between the choices of families in the first and the second treatment arm.

Our secondary outcomes are different factors in the school choice process: effort, beliefs, and perceived value of search. We hypothesize that the first treatment increased the effort that parents put into the search process. They should also have more correct beliefs and should perceive the value of search more than parents in the control group. By contrast, parents in the second correct treatment arm should put less effort in search than parents in the first treatment arm, but they should still have more correct beliefs and value search more than the control group.

The measures of knowledge and school choice may include the following:

Effort
- Number of schools visited by the parent
- Number of schools called by the parent
- Number of friends consulted by the parent
- Time invested in searching for schools

Beliefs
- Difference between the believed quality ranking of the enrolled school and the true ranking

Perceived value of search
- Probability of finding better school given initial awareness set
- Whether the parent recommends continuing searching given an initial awareness set

To disentangle the relative importance of search costs and biased beliefs, we conduct a field experiment with 724 households in 19 neighborhoods in Santo Domingo, Dominican Republic. To be eligible, households needed to have a child in the relevant age for choosing schools and state that they plan to enroll them for the first time in a primary school in the academic year 2018/19.

Initial beliefs and awareness sets were collected during a baseline and an intervention survey. Beliefs on the distributions were obtained by asking the respondent about the perceived quality and price of private and public schools at different terciles. The surveys also collected information on the number of children in the household, the respondent's network, and the valuation of specific school attributes. Information on schools in the neighborhoods was obtained from administrative data and school surveys. This includes information on prices, student/teacher ratios, and students’ performance on a national exam in 3rd grade.

Stratified by neighborhood, parents were randomly assigned to either the control group or to one of two treatment groups:

- Parents in the first treatment arm received a brochure with information on the joint distributions of quality and price of schools in their neighborhood. All the information is aggregated at the neighborhood level.

- Parents in the second treatment arm received a brochure that contains the same information as the brochure in the first treatment arm plus information on individual school attributes. Additional information on the school’s performance on a national exam in 3rd grade was given verbally since we were not allowed to include it in official documents.

- Parents in the control group received a placebo letter that contained general information on schooling.

Surveyors carefully explained the content to all parents to make sure that they understood the information. Endline data are collected in a phone survey that is conducted two months after the households receive the treatments.

Randomization is done in office by a computer.

Household

No

724

724 households

Control: 241 households
Treatment 1: 239 households
Treatment 2: 244 households