Charter school quality and parental decision making with school choice

Charter schools have become a very popular instrument for reforming public schools, because they expand choices, facilitate local innovation, and provide incentives for the regular public schools while remaining under public control. Despite their conceptual appeal, analysis has been hindered by the selective nature of their student populations. This paper investigates the quality of charter schools in Texas in terms of mathematics and reading achievement and finds that average school quality in the charter sector is not significantly different from that in regular public schools after an initial start-up period but that there is considerable heterogeneity. Perhaps more important for policy, however, is the finding that the parental decision to exit a charter school is significantly related to school quality. The magnitude of this relationship is substantially larger than the relationship between the probability of exit and quality in the regular public school sector and consistent with the notion that the introduction of charter schools substantially reduces the transactions costs of switching schools.