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The Value of School Facilities: Evidence from a Dynamic Regression Discontinuity Design

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  • Stephanie Riegg Cellini
  • Fernando Ferreira
  • Jesse Rothstein

Abstract

This paper analyzes the impact of voter-approved school bond issues on school district balance sheets, local housing prices, and student achievement. We draw on the unique characteristics of California's system of school finance to obtain clean identification of bonds' causal effects, comparing districts in which school bond referenda passed or failed by narrow margins. We extend the traditional regression discontinuity (RD) design to account for the dynamic nature of bond referenda, since the probability of future proposals depends on the outcomes of past elections. By law, bond revenues can be used only for school facilities projects. We find that bond funds indeed stick exclusively in the capital account, with no effect on current expenditures or other revenues. Our housing market estimates indicate that California school districts under-invest in school facilities: passing a referendum causes immediate, sizable increases in home prices, implying a willingness-to-pay on the part of marginal homebuyers of $1.50 or more for each $1 of facility spending. These effects do not appear to be driven by changes in the income or racial composition of homeowners, and the school bond impact on test scores cannot explain more than a small portion of the total housing price effect. Our estimates indicate that parents value improvements in other dimensions of school output (e.g., safety) that may be not captured by test scores.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14516.

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Date of creation: Dec 2008
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Publication status: published as The Quarterly Journal of Economics (2010) 125 (1): 215-261. doi: 10.1162/qjec.2010.125.1.215
Handle: RePEc:nbr:nberwo:14516

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Cited by:
  1. Wang, Wen & Duncombe, William D. & Yinger, John M., 2011. "School District Responses To Matching Aid Programs For Capital Facilities: A Case Study Of New York’S Building Aid Program," National Tax Journal, National Tax Association, vol. 64(3), pages 759-94, September.
  2. Gerdes, Christer, 2010. "Does Immigration Induce ‘Native Flight’ from Public Schools? Evidence from a large scale voucher program," SULCIS Working Papers 2010:1, Stockholm University Linnaeus Center for Integration Studies - SULCIS.
  3. Steve Gibbons & Stephen Machin & Olmo Silva, 2009. "Valuing School Quality Using Boundary Discontinuities," SERC Discussion Papers 0018, Spatial Economics Research Centre, LSE.
  4. Wong, Maisy, 2010. "The Relationship between Marginal Willingness-to-Pay in the Hedonic and Discrete Choice Models," MPRA Paper 51218, University Library of Munich, Germany.
  5. 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.
  6. Stephen Machin, 2011. "Houses and schools: valuation of school quality through the housing market: EALE 2010 presidential address," LSE Research Online Documents on Economics 47495, London School of Economics and Political Science, LSE Library.
  7. Alexander Whalley, 2013. "Elected versus Appointed Policy Makers: Evidence from City Treasurers," Journal of Law and Economics, University of Chicago Press, vol. 56(1), pages 39 - 81.
  8. Eric J. Brunner & Stephen L. Ross, 2009. "Is the Median Voter Decisive? Evidence of 'Ends Against the Middle' From Referenda Voting Patterns," Working papers 2009-02, University of Connecticut, Department of Economics, revised May 2010.
  9. Stephen Machin, 2011. "Houses and Schools: Valuation of School Quality through then Housing Market - EALE 2010 Presidential Address," CEP Occasional Papers 29, Centre for Economic Performance, LSE.

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