New Zealand has — compared to most countries around the world — done fairly well of late. We’ve avoided the disastrous youth unemployment afflicting many countries in Europe (although thankfully they appear to have turned the corner) and our Government’s fiscal position seems relatively sustainable. Amazing what favourable terms of trade and two decades of political stability can do for your Government’s books and society more generally. Booming net migration just provides the surplus icing on our fiscal cake. People voting with their feet suggests we’re doing something right.
And unlike the US and the UK, our Government and political institutions are also relatively sane.
But where might New Zealand as a country head next? I mean do we rest on our laurels and savour the moment? Or do we start looking at ways we can do better? I think most New Zealanders would opt for the latter option. And that’s one of the countries strengths: The willingness to identify issues, consider the options, and make changes. MMP being a prime case in point. As a more recent example, I’ve also been extremely encouraged by the NZ Herald’s excellent coverage of our issues with suicide. Top notch journalism: 1) identify an underlying problem; 2) asking some important questions; and 3) help people decide whether reforms are needed.
Policy reforms are never easy. They usually involve winners and losers, and — perhaps more importantly — people often simply don’t always agree on what sort of society we should live in. Such disagreement, however, is not an immutable force of nature. As Jonathan Haidt discusses in this Ted Talk on interactions between social psychology and political ideology, while we exist in something of a moral matrix that drives us away from people who think differently, we can also step outside the matrix to some degree.
Which brings me to the topic of today’s post: School zones. Why do I want to talk about school zones? Well, it’s hard to imagine any other government activity, perhaps aside from basic health and sanitation, which has a greater effect on the long-run health and wealth of our society than education.
I’ve also had the pleasure of spending the last 2-3 years ensconced in Amsterdam, where I’ve learned a few things about educational policies in the Netherlands and some of the recent research on the economics of education. I’ve come away with the feeling that New Zealand could lean a few tricks, not just from the crafty Dutch but also places like Finland. That’s not to imply that everything is fabulous in the Netherlands …
I’m not an education expert, mind you. So please bear in mind that I’m come at this issue from an economics perspective, which has its pros and cons. From what I can figure out, school zones in New Zealand are usually established where individual schools are “oversubscribed”. In this case, the Board of Trustees and/or the Ministry of Education determines the area within which students are guaranteed to have a spot at the associated school. That is the school zone (NB: Please correct me in the comment thread if I have something wrong). The Ministry has a useful website here if you would like more information.
From an urban economics perspective it’s quite clear what the effect of school zones will be: Schools are an amenity and property is immobile, while supply is — at least in New Zealand — less than perfectly elastic. This means the perceived value of accessing desireable schools will tend to be capitalized into property values. There’s a lot of evidence of a school premium in the Auckland context, and I’ve estimated hedonic price regressions where certain school zones add 5-10% to property prices. That’s an enormous amount of money, when you think about it.
I say “perceived” value because I personally doubt that parents’ perceptions of school quality are an accurate reflection of educational outcomes. A recent paper titled “The Elite Illusion: Achievement Effects at Boston and New York Exam Schools” considers the effects of elite schools in the U.S., for example, and concluded (source) that there was no effect on student performance, specifically (emphasis added):
Parents gauge school quality in part by the level of student achievement and a school’s racial and socioeconomic mix. The importance of school characteristics in the housing market can be seen in the jump in house prices at school district boundaries where peer characteristics change. The question of whether schools with more attractive peers are really better in a value-added sense remains open, however. … Our estimates suggest that the marked changes in peer characteristics at exam school admissions cutoffs have little causal effect on test scores or college quality.
Perhaps parents send their children to elite schools for other reasons, such as “building networks”, but that kind of social stratification brings me close to vomiting, so I’m happy just pretending that it doesn’t happen. Back to school zones …
So, school zones have the effect of increasing property prices close to desirable schools. The natural extension of this is that, ceteribus paribus, low income households will tend to be out-bid for access to desirable schools. When you think about it, this is effectively like privatizing schools, except that the “fees” are paid to landlords (via higher property prices) rather than to the school itself. So parents end up paying for education, but this revenue flows into property rather than education. I think this is a profoundly inequitable and inefficient outcome, and would welcome any government’s efforts to fix it.
One interesting implication of the school zoning problem is that it seems likely to exacerbate the problem it is trying to solve. If schools are over-subscribed, and they subsequently define an exclusive zone that leads to higher property prices, then we can expect development to follow. That is, while housing is less than perfectly elastic, it’s not completely inelastic. The development that follows from higher property prices places upwards pressure on school roll numbers. Where this causes higher attendance numbers at already constrained schools, then it may actually cause investment to flow to locations where the marginal cost of increasing student numbers are already high. Hmmm!
None of this, on it’s own, provides strong evidence that we should abolish school zones. But perhaps it is an indication that there may be potential problems that we should be concerned with. How do such things work in the Netherlands (or at least in Amsterdam)?
Well, the country is split into zones within which are several schools that are managed as a “pool”; the whole of Amsterdam is one zone, for example (NB: The system still allows for private schoosls, it’s just the the schools themselves have less say in enrolments). When students are about to finish primary school, they submit a preferential ranking of the secondary schools that they wish to attend within the wider zone, such as Amsterdam. Preferences fromm all students are collated and used to automatically assign students across to schools so as to maximise their preferences (similar to single transferable vote) while observing the capacity that is available in different schooos.
Where certain schools are over-subscribed, then students may be prioritised based on certain very limited conditions, typically whether siblings are present and/or low socioeconomic status. If students can’t be split based on priority, then attendance is determined by way of a lottery. Students that don’t get assigned to their most preferred school are then assigned to their next most preferred school, and so on until all students is assigned (NB: You can read the details of the matching process in this paper. The Dutch system strikes me as being efficient and equitable. And smart. Approximately 95% of students get their top 1 or 2 schools.
How does it compare to New Zealand’s system? Well under the Dutch system it’s possible that some students end up travelling further, although data in the Netherlands shows that households still have a strong preference to reduce transport costs. The key difference is, of course, that proximity is not a prerequisite for acceptance, such that the value of desirable schools is not solely reflected in property prices and rationing is achieved by other mechanisms.
Another advantage of the Dutch system is that by managing enrolments across an area, rather than for individual schools, the available schools are managed as a system, similarly to other (local) public services. In this way, the Dutch approach seems to leverage economies of scale and expertise in school management, while preserving opportunities for local input. The differences are significant, and I think are something we could learn from.
Takeaway message? While New Zealand is currently doing relatively well, they are still some underlying policy issues that could benefit from some attention. Now is perhaps the best time to address such issues: We currently have the luxury of budget surpluses and we can afford to invest some in making fundamental but ultimately beneficial changes to our policies.
What do you think? Should New Zealand change its policies on school zoning? Or should we leave them as is? If I was emperor then I’d change them overnight and the Grammar Zone property premium would disappear faster than my morning coffee.
Epilogue: This post does not detract from the hard work of teachers, principals, boards, academic staff, university administrations, or the Ministry of Education across New Zealand, which I have benefited from and greatly appreciate.