SWITCHING COSTS IN SCHOOL CHOICE SYSTEMS

Chilean households value academic quality and have access to detailed information about schools' characteristics.However, they seldom react to relative changes in the quality of schools and their potential competitors by switching schools.Why do students not switch more often despite their ability to do so each year?I document that families' preferences for schools exhibit inertia, which deters them from switching.To quantify this inertia, I estimate a discrete choice model combining rich administrative data and two sources of identification.First, some students are forced to switch because of schools' grade level configuration, which disrupts their inertia.Second, the introduction of a centralized assignment mechanism reduced search costs earlier for some students than for others.I find that families are willing to switch only if the destination school is substantially better than their current school.Further, I investigate the microfoundations of this inertia by surveying a random sample of parents.My findings indicate that attributes that develop through the schooling experience and that are difficult to modify through market forces or policy interventions, such as the learning environment and personal relationships, are relevant.This implies that the demand for schools is to some extent captive, which dilutes the incentives for schools to compete in attracting enrollment and could limit quality improvements in school choice systems.