December 2009

IZA DP No. 4679: Class Size and the Regression Discontinuity Design: The Case of Public Schools

published as 'Allocation of students in public schools: Theory and new evidence' in: Economics of Education Review, 2013, 34, 96-106

Using a rich individual-level dataset on secondary public schools in Israel, we find strong evidence for discontinuities in the relationship between enrollment and household characteristics at cutoff points induced by a maximum class size rule. Our findings extend existing work that documents such discontinuities only among private schools (Urquiola and Verhoogen, 2009). These discontinuities violate the assumptions underlying the regression discontinuity design, which are crucial for identification. Consequently, IV estimates of class size effects are likely to be seriously biased. Potential manipulation of the treatment assignment rule by public schools warrants caution in applying a regression discontinuity design to estimate class size effects and indicates that institutional context is crucial for its scope of applicability.