The Relationship Between Student Transfers and District Academic Performance: Accounting for Feedback Effects

This paper draws attention to a subtle, but concerning, empirical challenge common in panel data models that seek to estimate the relationship between student transfers and district academic performance. Specifically, if such models have a dynamic element, and if the estimator controls for unobserved traits by including district-level effects, then model validity does not allow for a district's academic performance, in turn, to impact future transfers. Yet it seems reasonable that families, having access to publicly available aggregated information on standardized test results, seek to move their children to better-performing districts. In this paper, we demonstrate that, not only is such feedback quantitatively and qualitatively important, but also that allowing for such feedback substantially alters the estimated relationship between transfers and district performance.