public school district, District of Columbia Public Schools (DCPS), which facilitates research design and data collection. Finally, it is relatively large with substantial variation in household demographics, which provides scope for charter entry.

Most charter entrants in D.C. have located in the most disadvantaged areas of the city, serve elementary and middle school students and offer a specialized curriculum. According to our estimates, household preferences over school characteristics are highly heterogenous, as are school quality and value added. On average, charter schools have a quality premium relative to public schools in middle school and in the District’s most disadvantaged areas. At the same time, fixed costs for charters are particularly high in those geographic areas and for high school. From a social standpoint, the existence of charter schools yields net benefits. Welfare gains from charters are highest for middle-school students, for whom charters contribute the most in quantity and quality of options, and for black, poor students in all school levels.

Given these benefits, in our counterfactuals we investigate alternative avenues for charter expansion in D.C., namely, a funding increase, a relaxation of approval (authorization) standards, and policies aimed at raising the supply of prospective entrants. Our results indicate that raising the supply of prospective entrants while maintaining strict approval standards is welfare-enhancing. Policies that facilitate the application process by aiding entrants in obtaining building facilities, developing business and instructional plans, learning from other charters and navigating bureaucratic processes can raise the supply of prospective entrants.

Throughout we make several contributions. First, we develop and estimate a rich yet tractable model of charter entry. While most charter school literature studies achievement effects,<sup>2</sup> relatively little research has focused on entry. In a reduced form fashion, Glomm et al (2005), Rincke (2007), Bifulco and Buerger (2012) and Imberman (2011) study charter entry while Henig and MacDonald (2002) study early charter location in Washington, D.C. Cardon (2003) models entrant quality choice when facing an existing public school. Closest to our approach is Mehta’s (2012) structural study of charter entry in North Carolina. We differ from Mehta in several ways: we model student heterogeneity in race, income and poverty status; we endogenize student body composition in these characteristics; and we include private schools in the student choice set. While we model charters as responsive to public schools, we do not model public school strategic response to charters given the lack of evidence for it - as explained below. In our model, as in reality, all charters in the economy are available to households regardless of their residential location, and this means that each public school competes against in New Orleans (91 percent), Detroit (55 percent), D.C. (44 percent), Flint (44 percent) and Cleveland (39 percent). Source: http://www.publiccharters.org.

> 2For a comprehensive review of the charter achievement literature, see Betts and Tang (2011). For recent studies, see Angrist et al (2013), Clark et al (2011) and references therein.

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