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Does the Housing Market React to New Information on School Quality?

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Author Info
Jon H. Fiva ()
Lars J. Kirkebøen ()

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Abstract

This paper analyzes housing market reactions to the release of previously unpublished information on school quality. Using the sharp discontinuity in the information environment allows us to study price changes within school catchment areas, thus controlling for neighborhood unobservables. We find a substantial housing market reaction to publication of school quality indicators, suggesting that households care about school quality, and may be willing to pay for better schools. The publication effect is robust to a number of sensitivity checks, but does not seem to be permanent as prices revert to prepublication levels after two to three months. We discuss this reversion in relation to the literature on behavioral finance and the concept of limited attention.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 2299.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2299

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Related research
Keywords: valuation of school quality hedonic methods price reversion

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Find related papers by JEL classification:
I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
I28 - Health, Education, and Welfare - - Education - - - Government Policy
R21 - Urban, Rural, and Regional Economics - - Household Analysis - - - Housing Demand
R23 - Urban, Rural, and Regional Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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  2. 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!] (restricted)
  3. Michael Greenstone & Justin Gallagher, 2008. "Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program," The Quarterly Journal of Economics, MIT Press, vol. 123(3), pages 951-1003, August. [Downloadable!] (restricted)
    Other versions:
  4. Kenneth Y. Chay and Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
    Other versions:
  5. 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)
  6. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Journal of Political Economy, University of Chicago Press, vol. 115, pages 588-638. [Downloadable!] (restricted)
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  7. David Brasington & Donald R. Haurin, 2006. "Educational Outcomes and House Values: A Test of the value added Approach," Journal of Regional Science, Blackwell Publishing, vol. 46(2), pages 245-268. [Downloadable!] (restricted)
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  8. Jesse M. Rothstein, 2006. "Good Principals or Good Peers? Parental Valuation of School Characteristics, Tiebout Equilibrium, and the Incentive Effects of Competition among Jurisdictions," American Economic Review, American Economic Association, vol. 96(4), pages 1333-1350, September.
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  10. Gur Huberman, 2001. "Contagious Speculation and a Cure for Cancer: A Nonevent that Made Stock Prices Soar," Journal of Finance, American Finance Association, vol. 56(1), pages 387-396, 02. [Downloadable!] (restricted)
  11. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-71, Nov./Dec.. [Downloadable!] (restricted)
  12. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation Of Elementary Education," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 577-599, May. [Downloadable!] (restricted)
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  13. Harrison Hong & Jeremy C. Stein, 2007. "Disagreement and the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 109-128, Spring.
  14. 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!]
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