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Neighborhood school characteristics: what signals quality to homebuyers?

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Author Info
Kathy J. Hayes
Lori L. Taylor
Abstract

Popular wisdom and economic research suggest that the quality of the neighborhood school should be an important determinant of housing values. Many researchers have found that housing values are higher where school spending or student test scores are higher. However, few economists consider these characteristics good indicators of school quality. Meanwhile, no one has examined whether the economists' notion of school quality-the school's marginal effect on students-is a school characteristic that matters to homebuyers. ; Using a model of new home purchases and historical data on homes in the Dallas Independent School District (DISD), Kathy Hayes and Lori Taylor demonstrate that property values do reflect the characteristics of the neighborhood school. They present evidence that property values reflect student test scores but not school expenditures. Interestingly, they also find that the relationship between test scores and property values arises from an underlying relationship between property values and the marginal effects of schools. Thus, their analysis suggests that homebuyers and economists share the same definition of school quality.

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File URL: http://www.dallasfed.org/research/er/1996/er9604a.pdf
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Article provided by Federal Reserve Bank of Dallas in its journal Economic and Financial Policy Review.

Volume (Year): (1996)
Issue (Month): Q IV ()
Pages: 2-9
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Handle: RePEc:fip:fedder:y:1996:i:qiv:p:2-9

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Keywords: Education ; Property tax;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Summers, Anita A & Wolfe, Barbara L, 1977. "Do Schools Make a Difference?," American Economic Review, American Economic Association, vol. 67(4), pages 639-52, September. [Downloadable!] (restricted)
  2. Rosen, Harvey S & Fullerton, David J, 1977. "A Note on Local Tax Rates, Public Benefit Levels, and Property Values," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 433-40, April. [Downloadable!] (restricted)
  3. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb.. [Downloadable!] (restricted)
  4. Michael L. Walden, 1990. "Magnet Schools and the Differential Impact of School Quality on Residential Property Values," Journal of Real Estate Research, American Real Estate Society, vol. 5(2), pages 221-230. [Downloadable!]
  5. Bartik, Timothy J. & Smith, V. Kerry, 1987. "Urban amenities and public policy," Handbook of Regional and Urban Economics, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 31, pages 1207-1254 Elsevier. [Downloadable!] (restricted)
  6. Hanushek, Eric A, 1986. "The Economics of Schooling: Production and Efficiency in Public Schools," Journal of Economic Literature, American Economic Association, vol. 24(3), pages 1141-77, September. [Downloadable!] (restricted)
  7. Bradbury, K-L & Case, K-E & Mayer, C-J, 1995. "School Quality, Local Budgets, and Property Values : A Re-Examination of Capitalization," Papers 95-15, Wellesley College - Department of Economics.
  8. Sonstelie, Jon C. & Portney, Paul R., 1980. "Gross rents and market values: Testing the implications of Tiebout's hypothesis," Journal of Urban Economics, Elsevier, vol. 7(1), pages 102-118, January. [Downloadable!] (restricted)
  9. Murphy, Kevin M & Topel, Robert H, 1985. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 370-79, October.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Theodore M. Crone, 1998. "House prices and the quality of public schools: what are we buying?," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 3-14. [Downloadable!]
  2. David Brasington & Don Haurin, . "Educational Outcomes and House Values: A Test of the Value-Added Approach," Departmental Working Papers 2005-03, Department of Economics, Louisiana State University. [Downloadable!]
    Other versions:
  3. David M. Brasington, 1999. "Which Measures of School Quality Does the Housing Market Value?," Journal of Real Estate Research, American Real Estate Society, vol. 18(3), pages 395-414. [Downloadable!]
  4. Elio H Londero, 2004. "Poverty Targeting Classifications and Distributional Effects," Public Economics 0407012, EconWPA. [Downloadable!]
  5. John M. Clapp & Anupam Nanda & Stephen L. Ross, 2005. "Which School Attributes Matter? The Influence of School District Performance and Demographic Composition on Property Values," Working papers 2005-26, University of Connecticut, Department of Economics, revised Jan 2007. [Downloadable!]
    Other versions:
  6. David N. Figlio & Maurice E. Lucas, 2000. "What's in a Grade? School Report Cards and House Prices," NBER Working Papers 8019, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2003. "A Unified Framework for Estimating Preferences for Schools and Neighborhoods," Working Papers 872, Economic Growth Center, Yale University. [Downloadable!]
  8. David N. Figlio & Maurice E. Lucas, 2004. "What's in a Grade? School Report Cards and the Housing Market," American Economic Review, American Economic Association, vol. 94(3), pages 591-604, June. [Downloadable!]
  9. Cho, Seong-Hoon & Bowker, J.M. & Park, William M., 2006. "Measuring the Contribution of Water and Green Space Amenities to Housing Values: An Application and Comparison of Spatially Weighted Hedonic Models," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(03), December. [Downloadable!]
    Other versions:
  10. David M. Brasington, . "Public and Private School Competition: The Spatial Education Production Function," Departmental Working Papers 2005-09, Department of Economics, Louisiana State University. [Downloadable!]
  11. Michael T. Owyang & Abbigail J Chiodo & Ruben Hernandez-Murillo, 2004. "Nonlinear Hedonics and the Search for School District Quality," Econometric Society 2004 North American Summer Meetings 276, Econometric Society. [Downloadable!]
    Other versions:
  12. David Brasington & Don Haurin, . "Capitalization of Parent, School, and Peer Group Components of School Quality into House Price," Departmental Working Papers 2005-04, Department of Economics, Louisiana State University. [Downloadable!]
  13. Elio H Londero, 2004. "Measuring Benefits, Tracing Distributional Effects, and Affecting Distributional Outcomes," Public Economics 0407011, EconWPA. [Downloadable!]
  14. David Brasington, . "School Choice and the Flight to Private Schools: To What Extent Are Public and Private Schools Substitutes?," Departmental Working Papers 2005-02, Department of Economics, Louisiana State University. [Downloadable!]
    Other versions:
  15. Thomas A. Downes & Jeffrey E. Zabel, 1997. "The Impact of School Quality on House Prices: Chicago 1987-1991," Discussion Papers Series, Department of Economics, Tufts University 9704, Department of Economics, Tufts University. [Downloadable!]
  16. John M. Clapp & Stephen L. Ross, 2001. "Schools and housing markets: an examination of school segregation and performance in Connecticut," Proceedings, Federal Reserve Bank of Chicago, issue Apr. [Downloadable!]
    Other versions:
  17. Velma Zahirovic-Herbert & Geoffrey Turnbull, 2008. "School Quality, House Prices and Liquidity," The Journal of Real Estate Finance and Economics, Springer, vol. 37(2), pages 113-130, August. [Downloadable!] (restricted)
  18. John B. Horowitz & Stanley R. Keil & Lee C. Spector, 2007. "Do Charter Schools Affect Property Values?," Working Papers 200707, Ball State University, Department of Economics, revised Nov 2007. [Downloadable!]
  19. Theodore M. Crone, 2006. "Capitalization of the quality of local public schools: what do home buyers value?," Working Papers 06-15, Federal Reserve Bank of Philadelphia. [Downloadable!]
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