Why are schools segregated? Evidence from the secondary-school match in Amsterdam

We use rich data from the secondary-school match in Amsterdam to nonparametrically decompose school segregation by ethnicity and by household income into five additive sources: i) ability tracking, ii) noise, iii) residential segregation, iv) preference heterogeneity, and v) capacity constraints. Important features of the Amsterdam school district are its diverse population, that students can freely choose any school at their ability level, that school density is high and that private schools are absent. We find that school segregation is mainly driven by ability tracking and students from different groups having different preferences. Residential segregation, capacity constraints and noise play only a minor role. Of the four policies that we analyze, affirmative action in the form of minority quotas reduces segregation the most. This comes, however, at the cost of reducing student welfare.