Pulled In and Crowded Out: Heterogeneous Outcomes of Merit-Based School Choice

We analyze the effects of reforming the high school admission system from a residence based allocation to a merit-based allocation. The merit-based system generates oversubscribed schools, which favor high-GPA students at the expense of displacing low-GPA ones. We use the potential outcomes framework to analyze the effects of the reform, separating the effects for those gaining access to competitive schools from those losing access and identifying these parameters by using the reform as an instrument within subpopulations defined by admission cutoffs and GPA. The small and negative overall effect of the reform hides large negative effects for the crowded-out students. (JEL H51, I21, I28)