Telling Schools Apart: The Role of Preferences, Constraints, and the Ability to Differentiate between Schools in Parents' Choices

imitations in the ability of parents to compare schools have important implications for market oriented educational systems, which rely on parents choices to improve quality through competition. To empirically study these limitations, we develop and estimate a static model of elementary school choice that distinguishes between preferences for academic quality, the ability to differentiate between schools of different quality, and constraints in terms of the schools available to different households. Because school quality might be endogenous to parents' choices, we identify the key parameters related to preferences for quality using exogenous variation in schools' funding introduced by a policy that substantially increased the voucher amount for each enrolled socioeconomically vulnerable student. We estimate the model using a combination of administrative and survey data from Chile, which includes rich information on how parents compare the academic quality of schools. Using counterfactual simulations, we find the interaction between limitations to tell schools apart and differences in preferences across households plays an important role in decreasing the quality of schools attended by Chilean children, especially for children with less educated parents.