Adam Kapor, Princeton University

Seminar

Date: Tuesday 21 November 2023

Time: 13.00 – 14.30

Location: IIES Seminar Room A822/Hybrid

Search and Biased Beliefs in Education Markets

Abstract: When learning about schools requires costly search, search decisions depend on families’ beliefs about the returns. This paper asks how families’ (limited) awareness of schools and (inaccurate) beliefs about schools’ prices, quality ratings, and placement chances distort their search efforts and application decisions in the context of Chile’s nationwide centralized school choice process. We combine novel data on search activity with a panel of household surveys, administrative application data, randomized information experiments, and a model of demand for schools. We find that households are unaware of many relevant schools, and hold inaccurate beliefs about admissions chances, prices, and quality scores, affecting their search decisions and application decisions. Most importantly, households’ perceptions systematically overstate the quality ratings of schools that they know and like. Correcting misperceptions about known schools causes students to match to schools with higher quality, equal to what can be achieved under a full-information benchmark, and closes the quality gap between lowSES and high-SES applicants.