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American Economic Review: Vol. 99 No. 1 (March 2009)


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Class-Size Caps, Sorting, and the Regression-Discontinuity Design

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Urquiola, Miguel, and Eric Verhoogen. 2009. "Class-Size Caps, Sorting, and the Regression-Discontinuity Design." American Economic Review, 99(1): 179-215.

DOI: 10.1257/aer.99.1.179


This paper examines how schools' choices of class size and households' choices of schools affect regression-discontinuity-based estimates of the effect of class size on student outcomes. We build a model in which schools are subject to a class-size cap and an integer constraint on the number of classrooms, and higher-income households sort into higher-quality schools. The key prediction, borne out in data from Chile's liberalized education market, is that schools at the class-size cap adjust prices (or enrollments) to avoid adding an additional classroom, which generates discontinuities in the relationship between enrollment and household characteristics, violating the assumptions underlying regression-discontinuity research designs. (JEL D12, I21, I28, O15)

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Urquiola, Miguel (Columbia U)
Verhoogen, Eric (Columbia U and BREAD, Duke U)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
I21: Analysis of Education
I28: Education: Government Policy
O15: Economic Development: Human Resources; Human Development; Income Distribution; Migration

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