School choice and switching costs

Abstract

ABSTRACTBackground: Voucher systems in education firmly rely on the parent’s ability tochoose their child’s school at any time during their schooling years. This ability,however, is reduced by switching costs.Methods: Using an identification for each student from fourth grade in 2000 toeighth grade in 2004, so we were able to verify if they changed schools. Thus,we can compare the expected utility associated with the chosen school with anew school that was not available in 2000 and the estimation of switching costs.Results: We find that on average switching costs are statistically significant and economicallyrelevant and that affect the decision to change the chosen school. Also,we show marginal changes in their levels of utility aren’t sufficiently significantto make decision to change at chosen school identifying an eventual threshold.Conclusions: The natural concern regarding parents’ capacity to react is given bythe existence of switching costs.