What kind of schools parents choose when they have more options? Effects of school transport subsidies

It seems that facilitating access to a higher spectrum of schools implies that students will attend higher quality schools, as measured by students’ end-of-class test scores. We test this hypothesis showing new evidence for the effects of school transport subsidies targeting low-income students on school choice in the context of a developing country (Colombia) using a unique panel dataset involving a public-school population with approximately 15 million records. We built a creative instrument deducing unobserved optimal commute decisions, which seems to satisfy the exclusion and relevance conditions, and we found by means of two-stage least squares that metro and bus subsidy beneficiaries choose statistically and economically significantly better schools, approximately a 33% and 37% improvement in the quality school index, respectively. In addition, we found using endogenous ordered probit models that these subsidies increase the probability of attending very high-quality schools by 59% and 94% for the representative beneficiary, respectively. These results suggest that the reduction of costs of transport not only increases accessibility and the set of school choices among low-income students, but also targets students enrolled in better quality schools. Therefore, the local government should increase efforts to get more subsidies targeting uncovered areas. •We explore the effects of school transport subsidies on the school choice.•Metro and bus transport subsidy programs that target low-income students were analyzed.•Subsidized beneficiaries choose statistically and economically significantly better schools.•Higher spectrum of schools by decreasing transport costs can boost to attend better quality schools.•Our results are useful for helping to design transportation policies that improve student accessibility to better school.