Many observers have argued that giving parents freedom to choose schools would improve education (Friedman, 1955). We review the evidence, and find little indication that households systematically prefer higher value added schools. We show that this can be explained using a competitive labor market model that takes into account both student and employer choice. The setup implies that households will often rationally prefer schools with high absolute achievement rather than high value added. As a result, school choice can exacerbate inequality without improving opportunities for the most disadvantaged students.
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