The Impact of Fiscal and Demographic Measures of School Quality: Evidence from New York

How do parents react to different types of information about school quality? This paper exploits New York state’s fiscal monitoring program to compare the effect of two different types of quality labels on school district outcomes: one reflecting budget solvency, the other reflecting economic and demographic pressures. Using a regression discontinuity design, I examine the effect of fiscal and "environmental'' stress labels on property values, school enrollment, graduation rates, and test scores. While fiscal stress labels have no effect, environmental stress labels – indicating social, economic, and demographic pressures, such as a high percentage of disadvantaged students – cause enrollment and property values to decline, especially in wealthier districts. Parents of school-age children are insensitive to fiscal indicators of school quality but respond at the margin to demographic indicators.