Parental choice, neighbourhood segregation or cream skimming? An analysis of school segregation after a generalized choice reform

J Popul Econ (2016) 29:1155–1190 DOI 10.1007/s00148-016-0595-y O R I G I N A L PA P E R Parental choice, neighbourhood segregation or cream skimming? An analysis of school segregation after a generalized choice reform Anders Böhlmark 1 & Helena Holmlund 2 & Mikael Lindahl 3 Received: 2 December 2015 / Accepted: 4 April 2016 / Published online: 20 April 2016 # The Author(s) 2016. This article is published with open access at Springerlink.com Abstract This paper studies the evolution of school segregation in Sweden in the aftermath of the 1992 universal voucher reform, which spurred the establishment of new independent schools and introduced parental choice. We assess the relative importance of neighbourhood segregation, parental choice and the location of independent schools for school segregation. In particular, we exploit variation in school choice opportunities across municipalities and provide descriptive evidence that in regions where Responsible editor: Erdal Tekin We are grateful to Magnus Bygren, Marcus Eliason, Oskar Nordström Skans and an anonymous referee for valuable comments and suggestions. We would also like to thank the seminar and conference participants at Uppsala (IFAU), VATT Helsinki, SUDA Stockholm University, ESPE 2013 in Aarhus and EALE 2014 in Ljubliana. Financial support from the Swedish Research Council for Health, Working Life and Welfare (FORTE) [grant no: 2013-0645] and the Swedish Research Council (Vetenskapsrådet) [grant number D0199201; 2007-2283] is gratefully acknowledged. Mikael Lindahl is a Royal Swedish Academy of Sciences Research Fellow supported by a grant from the Torsten and Ragnar Söderberg Foundation and also acknowledges financial support from the Scientific Council of Sweden and the European Research Council [ERC starting grant 241161]. * Helena Holmlund Anders Böhlmark Mikael Lindahl 1 Swedish Institute for Social Research, IFAU and CREAM, Stockholm University, 106 91 Stockholm, Sweden 2 Institute for Evaluation of Labour Market and Education Policy (IFAU), Box 513, 751 20 Uppsala, Sweden 3 Department of Economics, CESifo, IFAU, IZA and UCLS, University of Gothenburg, P.O. Box 640, 405 30 Göteborg, Sweden 1156 A. Böhlmark et al. school choice has become more prevalent, school segregation between immigrants and natives, and between children of high/low educated parents, has increased more than in regions where choice is limited. This result also holds when we account for residential segregation and focus on excess segregation over and above the segregation that would occur if all pupils attended their assigned schools. We find that the increase in school segregation 15 years after the reform that can be attributed to choice is relatively small. Keywords School segregation . School choice JEL classification I20 . J10 . H44 1 Introduction School segregation has received a lot of attention in the education debate because of a perception that segregation is accompanied by unequal resources, and because publicly funded education is one of few policy areas where society can act to level the playing field and create equal opportunities for children with different family backgrounds. There is also a general concern that social cohesion in society is adversely affected if interactions between children from different backgrounds are limited (Levin 1998). In the academic context, education research takes a specific interest in the grouping of students by ability and background, because of its potential consequences for the education production function. Segregation might imply negative effects on achievement for low-ability pupils through peer effects, but these may be offset by positive ‘tracking’ effects if it is more efficient to teach a homogenous group rather than a mixed group (Duflo et al. 2011). That said, segregation might still have consequences for other outcomes: Billings et al. (2014) show that re-segregation policies in the USA have increased youth crime, but that the negative effects on test scores were dampened by compensatory resource allocation. Despite the vast literature on segregation up to date, there is a limited understanding of the mechanisms that give rise to school segregation. Generally, school segregation can be driven either by residential segregation across neighbourhoods or by factors related to mechanisms for assigning pupils to schools. Residential segregation may be a result of residential sorting (including Tiebout choice) but can also stem from historical and institutional factors (such as housing policies or neighbourhood ethnic enclaves, etc). Mechanisms and rules for assigning pupils to schools include catchment area boundaries and school choice. Through school choice, families get the opportunity to opt out of the assigned school, and this opportunity may have different consequences for segregation depending on the school choice policy regulation (e.g. through schools’ possibilities to cream-skim the best students through selective admissions criteria or through strategic school locations). To address the question of which are the most important mechanisms behind school segregation, this paper is the first to simultaneously analyze the key determinants of school segregation: residential segregation and school choice. We try to separate school choice into pupils’ choice of opting out of the assigned school and schools’ efforts to cream-skim the best pupils. We are able to assess these three components, exploiting a policy change that introduced generalized school choice in Sweden, using excellent data on the full population of 16-year-old students, including information on their Parental choice, neighbourhood segregation or cream skimming? 1157 socioeconomic background, migration histories and the schools they attend, over a time period of more than 20 years. Our focus is on segregation with respect to pupils’ migration history and socioeconomic background. The former dimension is particularly important in light of the current EU migrant crisis and highly relevant for Sweden which has experienced a refugee-immigration per capita eight times the EU15 (i.e. the pre-2004 EU members) average in 2005–2014 (Ruist 2015). The recent development was preceded by a considerable growth of the refugee immigrant population since the 1980s. For the age-group that we study, the fraction of foreign-born 16-year olds increased from 5 to 10 % between the late 1980s and 2000, and an increasing share of foreign-born students arrived after school-starting age. The fraction of students who are either foreign-born or born in Sweden to two foreign-born parents has also increased and reached 17 % in 2000 (Holmlund et al. 2014). This development has raised concerns that schools with a high concentration of immigrant students will fail to keep up with educational standards (see e.g. Ministry of Education 2011). In the empirical analysis, we exploit variation in the growth of school choice opportunitie (...truncated)