Choose your peers

It's a bit tough to make sense of parents' preference for higher decile schools in New Zealand. Sure, pass rates are going to be higher than in low decile schools, but that's very plausibly entirely cohort effects rather than education effects. And lower decile schools will have smaller class sizes and greater per-pupil government funding.

Unless parents are choosing classmates rather than education.

Here's Carrell et al at NBER:

A large and growing literature has documented the importance of peer effects in education. However, there is relatively little evidence on the long-run educational and labor market consequences of childhood peers. We examine this question by linking administrative data on elementary school students to subsequent test scores, college attendance and completion, and earnings. To distinguish the effect of peers from confounding factors, we exploit the population variation in the proportion of children from families linked to domestic violence, who were shown by Carrell and Hoekstra (2010, 2012) to disrupt contemporaneous behavior and learning. Results show that exposure to a disruptive peer in classes of 25 during elementary school reduces earnings at age 26 by 3 to 4 percent. We estimate that differential exposure to children linked to domestic violence explains 5 to 6 percent of the rich-poor earnings gap in our data, and that removing one disruptive peer from a classroom for one year would raise the present discounted value of classmates' future earnings by $100,000.

They're able to identify effects by using within-school-grade variation: basically, if the school has a pile of 6th grade classrooms, effects are identified by variation across those classrooms rather than between schools.

To get a sense of the magnitude, they note that the effects of having four boys from families linked to domestic violence in the classroom is equivalent to the effect of replacing an average teacher with a teacher in the bottom 5 percent of all teachers. And note that effects cumulate where students can be paired with disruptive peers across several years.

If parents think that higher decile schools will have fewer behavioural issues in the classroom to deal with, decile-based heuristics make more sense.

We also show that due to sorting into schools, differential exposure to disruptive children explains roughly 5 or 6 percent of the earnings gap between those who grew up in lower income versus higher-income families. Given that we only have one particular proxy for disruptive peers, we view this as a lower bound of the impact of disruptive elementary school peers on income inequality. 

The benefits to disruptive students of being in mainstream classrooms would have to be substantial to make integrated classrooms desirable overall.