Under the package of reforms, known collectively as Tomorrow's Schools, the central Ministry of Education continues to fund schools, draft national curriculum guidelines and operate an accountability system under which teams from an independent Education Review Office visit schools.

Many school reformers in the United States and other developed countries see governance changes like those adopted in New Zealand as a key to improving the quality of public schools, including those serving disadvantaged students. The core argument is that if schools are freed from bureaucratic controls and forced to compete for students, they will have both the means and the incentives to become successful.

Since New Zealand has no national standardized tests, it is not possible to measure the impact of Tomorrow's Schools on student achievement. Nevertheless, it is evident that self-governance and parental choice were generally popular and that they had an energizing effect on many primary and secondary schools in middle- and upper-middle-income communities.

The Gladstone Primary School in Auckland, for example, has prospered by offering a program organized around the theory of multiple intelligences articulated by Howard Gardner, a Harvard University psychologist. ''No one is restricting us,'' said Colin Dale, the principal. ''The potential is now there to do whatever you want. It's all about meeting needs and performing. If you get it right, people will flock to you.''

On the negative side, however, the educational marketplace has polarized enrollment patterns by ethnicity and seriously complicated the problems of schools serving large disadvantaged populations.

Research shows that New Zealand parents of all races judge the quality of schools in part by the ethnic mix of their students. Schools with a preponderance of European students are seen as superior to those with large numbers of Maori and Pacific Islanders. In the new educational marketplace during the 1990's, student transfers caused schools that had served predominantly white students to grow in size, while those that served large numbers of minorities saw their rolls decrease.

DATA from the Ministry of Education show, for example, that here in Wellington the proportion of Maori and Pacific Island students in primary and intermediate schools who ranked lowest in socioeconomic status increased to 84 percent from 76 percent between 1991 and 1996. A recent study by the government-supported New Zealand Council for Educational Research also reported that the intended reforms ''appear to have acted in an unintended manner, which has increased ethnic polarization.''