Job Market Paper

Abstract: This paper explores how increased school competition, reflected in a broader choice set of public and private schools, affects educational quality and student academic achievement. I develop an equilibrium model where parents select schools from locally available options, while schools choose their quality attributes. The framework includes a value-added test score model that captures the influence of school quality on academic achievement and incorporates peer effects. I estimate the model using data from Mexico, where students are assigned to a default public school based on residence but can opt for a nearby public or private school. The analysis draws on three data sources: a national administrative database on Mexican schools, school quality metrics from a school census, and teacher wage data from the decennial Census. The study focuses on school choice at the critical transition between sixth and seventh grade, when students transition from primary school to middle school (grades 7-9). A counterfactual that reduces public school competition suggests that both sectors are negatively affected when competition is limited, supporting the idea that competition can drive greater effort from schools.