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Nonlinear hedonics and the search for school district quality

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  • Abbigail Chiodo
  • Rubén Hernández-Murillo
  • Michael T. Owyang

Abstract

A school’s quality is often inferred from the premium a parent must pay to buy a house associated with a better school. Isolating this effect, however, is difficult because better schools also tend to be located in nicer neighborhoods and, therefore, cost more for reasons other than school quality. Although recent work has been relatively successful in isolating this effect, it is limited to the extent that it assumes a linear effect of schools on housing prices. We examine this relationship and find that the premium for school quality is nonlinear: There is a premium for houses in better school attendance zones, but there is no penalty for houses in worse school attendance zones. Our results suggest that previous studies have undervalued parents’ willingness to pay for high-quality public schools, which, we argue, is attributable to underestimating the degree of heterogeneity in parental preferences.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2003-039.

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Date of creation: 2005
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Handle: RePEc:fip:fedlwp:2003-039

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Keywords: Econometric models ; Education ; Regional economics;

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References

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  1. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," NBER Working Papers 13236, National Bureau of Economic Research, Inc.
  2. den Haan, Wouter J. & Ramey, Garey & Watson, Joel, 1999. "Job Destruction and the Experiences of Displaced Workers," University of California at San Diego, Economics Working Paper Series qt1rd0w96t, Department of Economics, UC San Diego.
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  6. Kathy J. Hayes & Lori L. Taylor, 1996. "Neighborhood school characteristics: what signals quality to homebuyers?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 2-9.
  7. Bogart, William T. & Cromwell, Brian A., 1997. "How Much More is a Good School District Worth?," National Tax Journal, National Tax Association, vol. 50(2), pages 215-32, June.
  8. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
  9. Sandra E. Black, 1997. "Do better schools matter? Parental valuation of elementary education," Research Paper 9729, Federal Reserve Bank of New York.
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  13. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-92, December.
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  15. Weimer, David L. & Wolkoff, Michael J., 2001. "School Performance and Housing Values: Using Non-Contiguous District and Incorporation Boundaries to Identify School Effects," National Tax Journal, National Tax Association, vol. 54(n. 2), pages 231-54, June.
  16. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
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Cited by:
  1. 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.

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