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Nonlinear effects of school quality on house prices

Author

Listed:
  • Abbigail J. Chiodo
  • Ruben Hernandez-Murillo
  • Michael T. Owyang

Abstract

We reexamine the relationship between quality of public schools and house prices and find it to be nonlinear. Unlike most studies in the literature, we find that the price premium parents must pay to buy a house in an area associated with a better school increases as school quality increases. This is true even after controlling for neighborhood characteristics, such as the racial composition of neighborhoods, which is also capitalized into house prices. In contrast to previous studies that use the boundary discontinuity approach, we find that the price premium from school quality remains substantially large, particularly for neighborhoods associated with high-quality schools.

Suggested Citation

  • Abbigail J. Chiodo & Ruben Hernandez-Murillo & Michael T. Owyang, 2010. "Nonlinear effects of school quality on house prices," Review, Federal Reserve Bank of St. Louis, vol. 92(May), pages 185-204.
    • Handle: RePEc:fip:fedlrv:y:2010:i:may:p:185-204:n:v.92no.3
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    Citations

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    Cited by:

    1. Han-Jang No & Dai-Won Kim & Jung-Suk Yu, 2017. "Do Reserve Prices Yield Reference Price Effects in Korean Court Auctions of Residential Real Estate?," International Real Estate Review, Global Social Science Institute, vol. 20(1), pages 75-104.
    2. Christian A. L. Hilber, 2017. "The Economic Implications of House Price Capitalization: A Synthesis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(2), pages 301-339, April.
    3. Cano-Urbina, Javier & Clapp, Christopher M. & Willardsen, Kevin, 2019. "The effects of the BP Deepwater Horizon oil spill on housing markets," Journal of Housing Economics, Elsevier, vol. 43(C), pages 131-156.
    4. Farrer, Benjamin & Holahan, Robert & Shvetsova, Olga, 2017. "Accounting for heterogeneous private risks in the provision of collective goods: Controversial compulsory contracting institutions in horizontal hydrofracturing," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 138-150.
    5. Geoffrey K. Turnbull & Minrong Zheng, 2022. "Desegregation Litigation and School Quality Capitalization," The Journal of Real Estate Finance and Economics, Springer, vol. 64(2), pages 210-227, February.
    6. Geoffrey K. Turnbull & Minrong Zheng, 2021. "A Meta‐Analysis of School Quality Capitalization in U.S. House Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(4), pages 1120-1171, December.
    7. Yadavalli, Anita P. & Florax, Raymond J.G.M., 2013. "The Effect of School Quality on House Prices: A Meta-Regression Analysis," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151291, Agricultural and Applied Economics Association.
    8. Mathur, Shishir, 2022. "Non-linear and weakly monotonic relationship between school quality and house prices," Land Use Policy, Elsevier, vol. 113(C).
    9. Nguyen-Hoang, Phuong & Yinger, John, 2011. "The capitalization of school quality into house values: A review," Journal of Housing Economics, Elsevier, vol. 20(1), pages 30-48, March.
    10. Jørgen Lauridsen & Niels Nannerup & Morten Skak, 2013. "House prices and land regulation in the Copenhagen area," Journal of Property Research, Taylor & Francis Journals, vol. 30(3), pages 205-220, September.
    11. Chugunov, D., 2013. "Impact of School Quality and Neighborhoods on Housing Prices in Moscow," Journal of the New Economic Association, New Economic Association, vol. 17(1), pages 87-112.
    12. Hilber, Christian A. L., 2011. "The economics implications of house price capitalization a survey of an emerging literature," LSE Research Online Documents on Economics 58596, London School of Economics and Political Science, LSE Library.
    13. Xiaoping Zhou & Tong Lei & Yuyao Wang & Tianzheng Zhang & Yingjie Zhang & Yan Song & Yingxiang Zeng, 2022. "The spillover effect of senior neighbors on housing prices: Evidence from Beijing, China," Growth and Change, Wiley Blackwell, vol. 53(4), pages 1783-1812, December.
    14. Rivera Rodas, Elizabeth I., 2019. "Which New Yorkers vote with their wallets? The impact of teacher quality data on household sorting, and residential and school demographics," Economics of Education Review, Elsevier, vol. 68(C), pages 104-121.

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