The embarrassing findings appear in a two-year-old report by the Office for Standards in Education looking at school improvement programmes in America.
Inspectors found that struggling schools in New York were demoralised and stigmatised by being labelled as failing rather than spurred to improve.
The report says being labelled failing "appeared further to demoralise schools already struggling with basic problems. The conclusion here has to be that identification by itself is not sufficient to bring about improvement. This was particularly so where no concession was made to the difficult conditions, for example by some form of value-added assessment."
It contrasts the New York experience - where schools with low or worsening test scores are listed as failing - with a more consensual and successful approach taken in two other areas.
Factors contributing to better results included getting teachers to see improvement was needed and support remedial action. It was important to stick to a coherent package, reward success and help schools at risk, the report says.
The findings have serious implications for the Government's policy of publicly identifying failing schools and giving them time to improve before sending in "hit squads". The policy has also been endorsed by Labour.
The report will prove embarrassing in the run-up to the election when both parties are talking tough on education.
The report warns it would not be appropriate to transfer the findings to the British context because the systems are so different, but concludes: "The case studies should help throw light on developments in this country by providing evidence of what works (or in some cases, fails) in a very different setting. "
The report was completed shortly after Chris Woodhead - a vigorous supporter of the policy on failing schools - took up his post as Chief Inspector but OFSTED said it was never intended for publication. It was commissioned to inform inspectors, Government and other reports, it said.
School Assessment and School Improvement in the United States: Three Case Studies is likely to be seized on by teaching unions and OFSTED critics as proof that the inspection system does not work.
Peter Smith, Association of Teachers and Lecturers general secretary, said: "Public money has been spent on this report. Why has it not been published, particularly since Chris Woodhead has committed himself to raising public debate over all these issues surrounding school failure? A failure to publish and a failure to engage in the debate is bound to raise questions. Do you only publish that which tends to reinforce your own point of view?"
Tom Wylie, a former senior HMI, added: "Why is he [Chris Woodhead] still not learning from the US experience?"
OFSTED visited New York City, the KenmoreTonawanda district in New York State and Kentucky, which had improvement programmes.
They noted the New York system's parallels with the English schools "at risk" programme. Schools Under Registration Review were given an eight-point improvement plan, but pupil numbers made it impossible to close schools which did not improve within three years, as intended.
"A central assumption was that identification would spur improvement. In New York City the schools so identified were often in the most disadvantaged areas."
In Kenmore the emphasis was on consensus through participation of all staff, staff development, and devolving responsibility to schools. It "had as its central assumption the belief that the resulting increases in staff morale and teacher professionalism would deliver a continuous programme of school improvement." Self-evaluation and feedback were vital. External testing was treated cautiously. The inspectors said the programme had helped to turn around a school district in difficulties, transforming it "into one marked by many schools judged worthy of state or national excellence awards in the 1990s".
In Kentucky, a school programme set improvement targets based on school achievement. Deterioration was penalised and rewards were given for improving schools.
The unpublished OFSTED report, School Assessment and School Improvement in the United States, includes these case studies.
New York City: "The assumptions which underpinnned the Schools Under Registration Review [failing schools] approach were widely perceived to have several serious flaws. One educationist described the approach as being little more than 'taking names'.
"The assumption is that schools have the capacity to improve themselves, and that low and declining achievement can mainly be attributed to failure by the staff. Identifying schools, and the threat of sanctions if schools do not improve, will stimulate staff to make the necessary changes. However, as was very clear from the data and the visits, many SURR schools served the most disadvanta ged areas in the city, where problems and pressures were, if anything, increasing.
"The social and economic conditions in parts of New York City such as the South Bronx place them among the poorest urban areas in the United States. Such conditions cannot be used to excuse poor education. But it seems equally harsh to judge schools on their performance without taking some account of these conditions. This would imply some moves to assess schools on a value added basis that took account of differences in intake, or give them some financial advantage to attract and hold staff in what are difficult and sometimes dangerous settings.
"There is little doubt that the SURR process resulted in some stigmatisation."
Kenmore school district, town of Tonawanda, New York State: "The central idea underlying the Ken-Ton school improvement programme is that educational change and improvement is a long-term process. It therefore requires strong commitment by those most directly responsible for delivering education in school and classroom. If school staff are closely involved in this process, feel 'ownership ' of the decision, their commitment to the result will be that much higher.
"The programme is based on the school being the unit of change: each has a planning team of teachers, support staff, administrators, parents and community members - and in high schools, the students.
"One very striking feature of the programme was the involvement of all levels of staff in decision-making. Essentially there is no such thing as a 'failing school'. Rather the approach . . . has been to focus on excellence and excellent schools. Praise and celebration of the positive features of schooling have been the cornerstone of the present system.
"In promoting improvement the explicit strategy was to work first with those schools most willing to co-operate and rely on peer pressure to encourage the doubters to join in.
"The emphasis is on positive reinforcement to reach goals agreed through consensus, not on external imposition or sanctions. "