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School quality and housing prices: Empirical evidence from a natural experiment in Shanghai, China

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  • Feng, Hao
  • Lu, Ming
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    Abstract

    The endogeneity of education quality and quantity accounts for difficulties in appropriately identifying the causal relationship between education and housing prices. To determine how education quality is capitalized into housing prices, we deal with endogeneity bias by employing a natural experiment occasioned by China’s education reforms. Based on monthly panel data for 52 residential areas in Shanghai, we conducted a natural experiment based on the exogenous designation of specific high-quality schools as Experimental Model Senior High Schools (EMSHS). Our natural experiment proved useful in analyzing how new information affected housing prices in China’s developing housing market. We found evidence that housing prices included allowances for these new EMSHS designations. In general, the presence of an additional EMSHS (of the best quality) per square kilometer increases housing prices by 17.1%. If one additional, previously non-designated high school is designated as EMSHS in a residential area, housing prices will be 6.9% higher.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Housing Economics.

    Volume (Year): 22 (2013)
    Issue (Month): 4 ()
    Pages: 291-307

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    Handle: RePEc:eee:jhouse:v:22:y:2013:i:4:p:291-307

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    Web page: http://www.elsevier.com/locate/inca/622881

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    Keywords: Education; Housing market; Capitalization; Public goods; Natural experiment;

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