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.