This dissertation consists of three essays on the economics of education and market design. The first two chapters are united in their attention on school choice issues. Chapter 1 considers a specific application, whereas chapter 2 focuses on a matching mechanism widely used in multiple applications. Both chapters 1 and 3 explore equity concerns in education but through very different lenses (affirmative action vs. educational investment) and very different settings (the United States vs. Vietnam). Chapter 1 addresses the diversity issue that is especially prevalent in elite schools that select students based on exams. Whereas previous studies only consider the direct impact on elite schools, I quantify the effects of two widely-discussed affirmative action plans on both elite and regular schools in New York City. I find that the two plans have quite different effects. First, there is a trade-off between improving diversity and maintaining student quality in elite schools as measured by state test scores in middle school. Despite taking into account the socioeconomic status of students' neighborhoods, the Chicago plan gives rise mostly to reshuffling within elite schools. Thus, both the overall racial composition and quality of incoming students are largely preserved as in the status quo. In contrast, the Top 7% plan, which would accept into the elite sector students in the top 7% by academic performance of each public middle school, causes considerable flows of students between the elite and regular sectors. The elite sector experiences a substantial increase in the proportions of Black and Hispanic students, along with a decrease in average student quality. Analyzing the difference between the outcomes of these two policies provides some insight into how the two objectives—diversity and peer quality in elite schools—might be better balanced in general. The second difference between the plans arises because they transform the distribution of diversity across schools in different ways. The Chicago plan reduces the differences among schools within the elite sector, while the Top 7% plan reduces the gap in diversity between the two sectors even as it increases within-sector dispersion. Both plans result in considerable changes in school assignments in the regular school sector, thus affecting the average student quality in these schools. Chapter 2, joint work with Guillaume Haeringer and Silvio Ravaioli, uses a lab experiment to study learning dynamics when participants receive feedback in centralized matching mechanisms. Our design allows for two types of learning: to coordinate within the same environment as well as to understand the underlying mechanisms. We provide additional evidence to previous work that the majority of the deviations from truth-telling, the dominant strategy in the Deferred Acceptance mechanism, are those that do not affect payoffs. Furthermore, by explicitly analyzing learning, we can confirm that at least some of the participants learn about the optimality of truth-telling, and their departures from it happen primarily when they face the same environment being repeated. Finally, we find that when learning to coordinate, agents tend to retain their previous strategy when the payoff from this strategy is high. This is suggestive evidence of reinforcement learning. Chapter 3 documents the pattern of educational investments for high school students across different demographics and their effects on performance on the college entrance exam and in college. Survey data from Vietnam shows that high school students from higher-income households have higher education expenditure and participation in extra classes (both at the extensive and intensive margin). Minority and rural students invest less than their non-minority and urban counterparts even after controlling for income. Out of these investments, only extra classes during the school year education expenditure other than that on extra classes are effective in increasing college entrance exam scores. In terms of college performance, a higher entrance exam score leads to a slightly higher grade point average at graduation, controlling for academic department fixed effects and investments in high school. Neither education expenditure or participation in extra classes in high school show any significant effects on college performance, except that already captured in the entrance exam scores. I record multiple gender differences. Female high school students tend to receive more investments. Even though they perform slightly worse on the entrance exam than their male peers with the same investments, they perform better in college, given the same entrance exam scores.

Education is at the center of upskilling human capital in developing countries, thereby positively influencing economic growth and development. For decades, many education policies targeted at developing countries have been narrowly focused on improving access to basic education (Barrett et al., 2015). However, access to education does not always translate into educational attainment. Thus, beyond the initial goal of expanding access to education in developing countries, there has been a growing focus on delivering quality education on the development agenda for developing countries in recent years. One popular policy instrument in enhancing education quality has been school choice. Analysis of school choice and the subsequent academic performance outcomes can provide new insight on the economics of education to policymakers, schools, parents and students alike. This dissertation consists of three essays, which focus on understanding the demand for public schools and the returns to school quality in a merit-based competitive school assignment system. In particular, these papers investigate how positive recognition of ability through awards can affect the students’ decision-making process; what the students might gain from attending a more selective school; and how students balance between their preferences for school characteristics and maximizing their chances of admission in a competitive school choice market. Altogether, this dissertation highlights the role of information as well as educational background in explaining differences in school choice decisions and achievement outcomes. In chapter 1, I examine the role of positive recognition on students’ school choice decisions and achievement outcomes in the context of academic competitions. Academic competitions are an essential aspect of education. Given the prevalence and the amount of resources spent organizing them, a natural question that arises is the extent of the impact on winners’ education outcomes when their talent is recognized. I exploit the award structure in Vietnam’s annual regional academic competitions to answer this question. By leveraging the pre-determined share of awards, I apply a regression discontinuity design to assess the effects of receiving a Prize and receiving an Honorable Mention. I find that both types of awards lead to improvements in educational outcomes, and the results are persistent after three years. I also find some evidence of specialization associated with receiving a Prize Award. I hypothesize that long-term effects can be partially explained by school choice: winners are significantly more likely to apply to and consequently enroll in higher-quality schools. There are also prominent differences in educational choices and outcomes along gender lines: female students are more sensitive to award receipts than male students. These findings underscore the positive motivational effects of awards, even among the top performers in a highly competitive schooling market. In chapter 2, I explore the impacts of attending a selective school on students’ educational outcomes. Students in Vietnam are assigned to public high schools based on their performance in a placement exam as well as their ranked choice of schools. Public schools are often oversubscribed, which contributes to exogeneous admission score cutoffs below which students are not considered for admission. By applying a regression discontinuity research design to these admission score cutoffs, I find that students who are marginally admitted to their top-choice public schools are exposed to significantly higher-achieving peers while finding themselves at the bottom of the ability distribution. They experience some improvements in standardized test scores at the end of their high school, but fare worse in school-based achievements and graduation outcomes. These findings highlight the importance of the potential trade-offs between attending more selective schools with better peer quality while receiving a lower ordinal rank in the ability distribution in the assigned school. In addition, the impacts of selective schools on students vary along the lines of the students’ own attitude towards studying as well as their middle school educational background. This substantial heterogeneity collectively highlights the importance of considering the students’ past educational background in interpreting how selective schools might impact students’ outcomes. In chapter 3, I investigate students’ preferences, strategic behaviors and welfare outcomes under a competitive school choice market by conducting a survey on school choice participants in two school districts in Vietnam. The original survey data on school choice participants, coupled with administrative data, afford me the opportunity to understand true preferences and strategies without involving strong assumptions on the students’ beliefs. In order to balance out their own preferences and chance of admission in such a competitive setting, the majority of students exhibit strategic behaviors. However, students from less advanced educational backgrounds tend to have large belief errors and are more likely to make strategic mistakes. Consequently, these students are at a disadvantage, as they find themselves among lower-achieving peers in their new schools. With preference data from the survey, I estimate the students’ preferences for school characteristics and find evidence of heterogeneity in students’ preferences for school characteristics: students from more advanced educational backgrounds value school selectivity and teacher qualification more than their peers. Using these estimates to evaluate students’ welfare under the current assignment mechanism as well as a counterfactual strategy-proof deferred acceptance algorithm, I find that switching to deferred acceptance algorithm can be welfare-improving, particularly for high-performing students. Overall, this paper provides a starting point to directly study the drawbacks of manipulable assignment mechanisms by using survey data and highlight the potential disparity in preferences and application strategies that can further widen the gap in educational mobility.

This dissertation empirically studies market design based centralized school choice. Chapter 1 explores the dynamic relationship between school choices made at different educational stages and how it affects racial segregation across schools. It uses New York City (NYC) public school choice data to ask: "How does the middle school that a student attends affect her high school application and assignment?" The paper takes two approaches to answer the question. First, it exploits quasi-random assignments to middle schools generated by the tie-breaking feature of the admissions system. It finds evidence that students who attend high-achievement middle schools apply and are assigned to high-achievement high schools. Second, based on this empirical evidence, the paper develops and estimates a novel dynamic two-period model of school choice to decompose this effect and analyze the equilibrium consequences of counterfactual policies. In the model, students applying to middle schools are aware that their choices may affect which high schools they eventually attend. Specifically, the middle schools that students attend can change how they rank high schools (the application channel) and how high schools rank their applications (the priority channel). It finds that the application channel is quantitatively more important. Using the estimated model, the paper asks if an early affirmative action policy can address segregation in later stages. It finds that a middle school-only affirmative action policy can alter students' high school applications and thus their assignments, contributing to desegregating high schools. This finding suggests that early intervention in the form of middle school admissions reform can be a useful tool for desegregation. Chapter 2 studies the relationship between the popularity of selective exam schools and their academic performance measures. NYC specialized high schools are highly selective and popular among students and parents. Nevertheless, the reason why those schools are so popular compared to non-specialized high schools has not been studied yet. This paper aims to answer the question in the context of academic performance by studying the relationship among three factors: preference of specialized high schools applicants, peer qualities, and causal effectiveness of those schools. First, a unique feature of the NYC public high school admission system enables linking applicants' preferences on specialized high schools and non-specialized high schools and hence jointly estimating those using their rank-ordered lists. Next, it estimates the value-added measures of high schools and finally links them back to the estimated preference in the first step. The paper finds that the additional valuation that students/parents put on specialized high schools relative to non-specialized high schools is mostly related to the higher peer quality of specialized high schools. Chapter 3 develops a method of inferring students' preferences from school choice data. Recent evidence suggests that market participants make mistakes (even) in a strategically straightforward environment but seldom with significant payoff consequences. This paper explores the implications of such payoff-insignificant mistakes for inferring students' preferences from school choice data. Uncertainties arise from the use of lotteries or other sources in a typical school choice setting; they make certain mistakes more costly than others, thus making some preferences---those whose misrepresentation would be more costly and would thus be avoided by students---more reliably inferable than others. The paper proposes a novel method of exploiting the structure of the uncertainties present in a matching environment to robustly infer student preferences under the Deferred-Acceptance mechanism. Monte Carlo simulations show that the method is superior to existing alternative approaches.

In many real-world settings, individuals face a dynamic decision problem: choices in the present have an impact on future outcomes. It it important for researchers to recognizing these dynamic forces so that we are able to fully understand the trade-offs an individual faces and to correctly estimate the parameters of interest. I study dynamic decision making in three diverse contexts: residential choice of families in New Zealand, search strategies of ridesharing drivers in Texas, and welfare participation of single mothers in Michigan. In each of these, I motivate the analysis using a theoretical model, and bring the model to the data to estimate parameters and evaluate testable implications. In the first chapter, I ask: how do schools affect where families choose to live and does their effect contribute to residential segregation? I study these questions using unique administrative microdata from Auckland, New Zealand, an ethnically diverse -- but segregated -- city. I develop and estimate a dynamic model of residential choice where forward-looking families choose neighborhoods based on their children's schools, local amenities, and moving costs. Previous studies typically estimate school quality valuations using a boundary discontinuity design. I leverage attendance zones in this setting to also generate reduced form estimates using this methodology. The structural model estimates show that the valuation of school quality varies by the child's school level and the family's ethnicity; the reduced form approach, however, cannot capture this heterogeneity. Moreover, I find that the reduced form estimates are aligned only with white families' valuations of quality. The model estimates also show that families experience a high disutility from moving houses if it results in their child changing school. In counterfactuals, I show that residential segregation increases as the link between housing and schools weakens. In the second chapter, co-authored with Vinayak Iyer, we ask: what drives the efficiency in ridesharing markets? In decentralized transportation markets, search and match frictions lead to inefficient outcomes. Ridesharing platforms, who act as intermediaries in traditional taxi markets, improve upon the status quo along two key dimensions: surge pricing and centralized matching. We study how and why these two features make the market more efficient; and explore how alternate pricing and matching rules can improve outcomes further. To this end, we develop a structural model of the ridesharing market with four components: (1) dynamically optimizing drivers who make entry, exit and search decisions; (2) stochastic demand; (3) surge pricing rule and (4) a matching technology. Relative to our benchmark model, surge pricing generates large gains for all agents; primarily during late nights. This is driven by the role surge plays in inducing drivers to enter the market. In contrast, centralized matching reduces match frictions and increases surplus for consumers, drivers, and the ridesharing platform, irrespective of the time of the day. We then show that a simple, more flexible pricing rule can generate even larger welfare gains for all agents. Our results highlight how and why centralized matching and surge pricing are able to make the market more efficient. We conclude by drawing policy implications for improving the competitiveness between taxis and ridesharing platforms. In the third chapter, co-authored with Lucas Husted, we ask: does removing families from welfare programs result in increased employment? Using detailed administrative data from Michigan, we study a policy reform in the state's TANF program that swiftly and unexpectedly removed over 10,000 families from welfare while quasi-randomly assigning time limits to over 30,000 remaining participants. We motivate our analysis using a dynamic model of welfare benefits usage. Consistent with economic theory, removing families from welfare increases formal labor force participation by roughly 4 percentage points (20\% over control group mean), with increases in annualized earnings of roughly \$500. However, despite this, the majority of families remain formally unemployed after welfare removal, and using quantile regressions we show that even the highest percentile wage gains fail to offset the loss in welfare benefits. The policy even affects families who are far from exhausting their time-limited benefits. Under a dynamic model, families have an incentive to bank benefits for future use -- an effect we observe in the data. Overall, our findings provide evidence that, contrary to their stated goals, welfare reform measures that either kick families off welfare or make welfare harder to access could possibly deepen poverty.