School choice vs. district-based enrollment is a tricky question. While school choice can certainly lead to inequalities, a district-based system is more subtle. In certain cultures, it will be more egalitarian, while in others it can set off a gradual increase in inequality.
District-based admissions to schools can at first seem egalitarian, but as the new system is implemented, families adjust. Specifically, richer families will have the means to move to districts with better schools. This effectively can lead not only to the greater segregation of schools, but also to the greater segregation of neighborhoods.
Lee (2013) examines evidence for this in South Korea. In South Korea, certain large cities switched (due to a mandate from the government) from exam-based to district-based admissions at their high schools in the 1970s. (‘Exam-based’ refers to schools commissioning entrance exams to decide who to admit.)
Consider the fact that a person’s income is dependent on his parents’ income. I.e. if your parents are richer, you’re more likely to be richer. The extent of this can actually be measured with a concept called intergenerational income elasticity (IIE). IIE basically measures the extent of this phenomenon. A low IIE means parents’ income is a bad predictor of a person’s income, meaning that social mobility is high; and vice versa. IIE varies between around 0.15 and 0.50 across countries, so there is considerable heterogeneity in the world.
To interpret these numbers, think of it this way: an IIE of 0.20 means that if you increase someone’s parents’ income by 10%, that person’s income will increase by 2% on average. So a loose interpretation could be to say that in this case 20% of income differences are explained purely by the income of parents and not education, skills or anything like this.
If a country is to shift from an exam-based to a district-based system (or the other way around), then ideally a researcher can check IIE before and after the shift, and see how the reform affected social mobility. This is exactly what Lee (2013) does. Given that the switch happened about 30 years ago, he has good long-term data on the incomes of the people who were educated around the time of the reform.
First, Lee (2013) finds that IIE indeed increased after switching to the district-based system from around 0.20 to above 0.30. This means that a district-based system was detrimental to social mobility in South Korea. Lee (2013) also shows that it was households in the 3rd quartile (i.e. between the top 25 and top 50 percent) who most benefited from this. The richest households (the 4th quartile) probably already lived in good enough neighborhoods. The poorer households probably did not have the means to relocate, and thus to take advantage of the new district-based system.
But did this change in IIE happen because of the school reform for sure? When Lee (2013) adds the quality of college attended to his model, he finds that it explains income better than all the other variables (including the reform). Matter of fact, the reform becomes insignificant. So it appears that college quality drives income, but what drives differences in college quality? Differences in college quality are very much influenced by the reform. Specifically, the effect of parents’ income on college quality doubles after the reform, and this difference is highly significant. So indeed, it appears that the change in IIE is driven by differences in college quality, which in turn were highly enhanced by the switch to the district-based system. Thus the change in IIE is probably due to the reform.
Second, Lee (2013) also confirms that the reform brought selective migration with it. Selective migration simply means that a certain socioeconomic group is more likely to migrate. In this case, Lee finds that while before the reform poorer households were more likely to migrate, after the reform the difference between rich and poor households’ willingness to migrate disappears. I.e. the reform induced richer households to migrate more. This is consistent with the hypothesis that the district-based system increases IIE because richer households migrate into neighborhoods with better schools.
The bottom line is therefore that the switch from an exam-based to a district-based school system in the 1970s decreased social mobility in South Korea. The author points out though that the opposite effects have been found in Scandinavia. He speculates that one of the reasons for this might be that in Korea the culture of the educational system is more competitive as opposed to being egalitarian like in Scandinavia. So basically Koreans are more willing to move for a better school than Scandinavians are.
This perhaps also reflects the general inequality in the countries in question. I.e. if the reason to move is that you want your child to be better off later in life, then ceteris paribus in a less unequal country you would be less willing to move. Why? Because your child will have a very good chance of living well later in life, even if she goes to a somewhat worse school, because your country is highly egalitarian. Something, which is certainly true of Scandinavia. I would expect the US to be culturally closer to Korea in this regard. (Also, in my experience Scandinavian neighborhoods are relatively heterogeneous, which is not at all true of US neighborhoods.)
Note though that this research doesn’t necessarily imply that switching from a district-based to an exam-based system will decrease IIE (i.e. increase social mobility). But there is a good chance that it might. So this certainly lends some support to the proponents of wider school choice. On the other hand, the conclusions of other papers warn that context matters a lot.
Finally, note that a district-based system in this case can lead to a greater segregation of neighborhoods. This can have some very bad effects on inequality. Specifically, I would think it can lead to a much larger cultural divide. All kinds of socioeconomic groups will live in their own little enclaves, cutting off the rest of the world. This can perhaps give rise to especially extreme manifestations of certain subcultures, out of touch with reality outside their own bubble. This is just my speculation though.