DRAFT: PRELIMINARY AND INCOMPLETE PLEASE DO NOT CITE OR CIRCULATE Understanding the Effect of Assessed Ability on School Choice and Investment in Schooling

Standard human capital theory predicts that, with no capital constraints, parents will tend to invest more in education when they think their child is abler than his peers. This paper tests this prediction using a large sample of kindergarten students, the ECLS-K study. As a measure of investment in education I propose a dichotomous variable for whether the school the child is in is chosen by the parent or assigned. I found a positive correlation between assessed ability and investment on education. As assessed ability might be in part a product of prekindergarten schooling decisions also correlated with kindergarten choice, I include these decisions as control variables to find that the correlation between assessed ability and choice remains significant. These results suggest that school choice programs are likely to favor high ability kids more than low ability kids (not only through the obvious ability-gap channel but also because parents of low ability children are less likely to exercise choice), a consequence worth considering when studying the impact and extension of these programs.