Performance-based rankings and school quality

Abstract

I study students’ inferences about school quality from performance-based rankings in a dynamic setting. Schools differ in location and unobserved quality; students differ in location and ability. Short-lived students observe a school ranking as a signal about schools’ relative qualities, but this signal also depends on the abilities of schools’ past intakes. Students apply to schools, trading off expected quality against proximity. Oversubscribed schools select applicants based on an admission rule. In steady-state equilibrium, I find that rankings are more informative if more able applicants are given priority in admissions or if students care less about distance to school.