What kind of schools parents choose when they have more options? Effects of school transport subsidies

It seems that facilitating access to a higher spectrum of schools implies that students will attend higher quality schools, as measured by students’ end-of-class test scores. We test this hypothesis showing new evidence for the effects of school transport subsidies targeting low-income students on school choice in the context of a developing country (Colombia) using a unique panel dataset involving a public-school population with approximately 15 million records. We built a creative instrument deducing unobserved optimal commute decisions, which seems to satisfy the exclusion and relevance conditions, and we found by means of two-stage least squares that metro and bus subsidy beneficiaries choose statistically and economically significantly better schools, approximately a 33% and 37% improvement in the quality school index, respectively. In addition, we found using endogenous ordered probit models that these subsidies increase the probability of attending very high-quality schools by 59% and 94% for the representative beneficiary, respectively. These results suggest that the reduction of costs of transport not only increases accessibility and the set of school choices among low-income students, but also targets students enrolled in better quality schools. Therefore, the local government should increase efforts to get more subsidies targeting uncovered areas.