Neighbors' Spillovers on High School Choice

Do residential neighbors affect each others' schooling choices? We exploit oversubscription lotteries in Chile's centralized school admission system to identify the effect of close neighbors on application and enrollment decisions. A student is 5-7% more likely to rank a high school as their first preference and to attend that school if their closest neighbor attended it the prior year. These effects are stronger among boys and applicants with lower parents' education and prior academic achievement, measured by previous scores in national standardized tests. Lower-achieving applicants are more likely to follow neighbors when their closest neighbor's test scores are higher. A neighbor enrolling in a school with one s.d. higher school effectiveness, peer composition, or school climate induces increases of 0.02-0.04 s.d. in the applicant's attended school. Our findings suggest that targeted policies aimed at increasing information to disadvantaged families have the potential to alleviate these frictions and generate significant multiplier effects.