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Valuing School Quality Using Boundary Discontinuities

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  • Steve Gibbons
  • Stephen Machin
  • Olmo Silva

Abstract

A large body of international research shows that house prices respond to local school qualityas measured by average test scores. But better test scores could signal better expectedacademic outputs or simply reflect higher ability intakes, and existing studies rarelydifferentiate between these two channels. In our research, we simultaneously estimate theresponse of prices to school 'value-added' and school composition to show more clearly whatdrives parental demand for schools. To achieve consistent estimates, we push to the limit theuse of geographical boundary discontinuities in hedonic models by matching identicalproperties across admissions authority boundaries; by allowing for a variety of boundaryeffects and spatial trends; by re-weighting our data to only consider the transactions that areclosest to education district boundaries; and by submitting the estimates to a number ofpotentially destructive falsification tests. Our results survive this battery of experiments andshow that a one-standard deviation change in either school value-added or prior achievementraises prices by around 3%.

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Bibliographic Info

Paper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0018.

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Date of creation: Mar 2009
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Handle: RePEc:cep:sercdp:0018

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Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp

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Keywords: House prices; school quality; boundary discontinuities;

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References

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Citations

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Cited by:
  1. Gibbons, Stephen & Silva, Olmo, 2011. "School quality, child wellbeing and parents' satisfaction," Economics of Education Review, Elsevier, vol. 30(2), pages 312-331, April.
  2. Stephen Gibbons & Olmo Silva & Felix Weinhardt, 2010. "Do Neighbours Affect Teenage Outcomes? Evidence from Neighbourhood Changes in England," SERC Discussion Papers 0063, Spatial Economics Research Centre, LSE.
  3. Meghir, Costas & Rivkin, Steven, 2011. "Econometric Methods for Research in Education," Handbook of the Economics of Education, Elsevier.
  4. Machin, Stephen & Salvanes, Kjell G., 2010. "Valuing School Quality via a School Choice Reform," IZA Discussion Papers 4719, Institute for the Study of Labor (IZA).
  5. Graves, Jennifer, 2013. "School calendars, child care availability and maternal employment," Journal of Urban Economics, Elsevier, vol. 78(C), pages 57-70.
  6. Scott Andrew Imberman & Michael Lovenheim, 2013. "Does the Market Value Value-Added? Evidence from Housing Prices after a Public Release of School and Teacher Value-Added," CESifo Working Paper Series 4105, CESifo Group Munich.
  7. Steve Gibbons & Henry G. Overman, 2010. "Mostly Pointless Spatial Econometrics?," SERC Discussion Papers 0061, Spatial Economics Research Centre, LSE.
  8. Stephen Machin & Sandra McNally, 2012. "The Evaluation of English Education Policies," National Institute Economic Review, National Institute of Economic and Social Research, vol. 219(1), pages R15-R25, January.
  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. Gibbons, Steve & Silva, Olmo & Weinhardt, Felix, 2011. "Everybody Needs Good Neighbours? Evidence from Students' Outcomes in England," IZA Discussion Papers 5980, Institute for the Study of Labor (IZA).
  11. Boustan, Leah Platt, 2013. "Local public goods and the demand for high-income municipalities," Journal of Urban Economics, Elsevier, vol. 76(C), pages 71-82.
  12. Feng, Hao & Lu, Ming, 2013. "School quality and housing prices: Empirical evidence from a natural experiment in Shanghai, China," Journal of Housing Economics, Elsevier, vol. 22(4), pages 291-307.

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