DP16853 Pulled-in and Crowded-out: Heterogeneous Outcomes of Merit-based School Choice
We study the effects of changing the rule that defines how students are selected into high schools
in a context where school capacity is fixed. Schools for which demand exceeds supply must necessarily
exclude some students from enrollment. We provide a theoretical framework to analyze the overall
effect of policy changes, taking into account the crowding-out effect. By exploiting a reform that
implemented merit-based allocation in Norway, we show that we can identify the relevant parameters.
The reform had an overall negative effect because of the negative impact on crowded-out students.
Different allocation rules would result in higher average outcomes.