Inclusive education and parental choice: How student characteristics affect school efficiency

This paper investigates how inclusive education reforms intersect with parental choice to influence school efficiency in Estonia - a system that is formally comprehensive, but increasingly selective in practice, leading to quasi-market dynamics. Applying a two-stage double-bootstrap Data Envelopment Analysis (DEA) on post-pandemic data from over 300 lower secondary schools, we assess how non-discretionary student characteristics (environmental variables), particularly special educational needs (SEN), parental income and immigration background, affect school-level efficiency. Our findings show that higher proportions of SEN students and students from low-income families are systematically associated with lower efficiency, especially in contexts where schools have no autonomy over admissions, such as neighbourhood schools. In contrast, oversubscribed or elite schools can afford to be selective, reinforcing reputational hierarchies and equity-harming quasi-market dynamics. By linking efficiency analysis with educational governance, we discuss how school market characteristics can easily jeopardise the inclusive education reform. Evidence shows that in a hybrid market, non-selective schools are worse positioned in terms of efficiency than selective schools.