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

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Author Info
Stephanie Riegg Cellini
Fernando Ferreira
Jesse Rothstein

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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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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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Handle: RePEc:nbr:nberwo:14516

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Health, Education, and Welfare
I22 - Health, Education, and Welfare - - Education - - - Educational Finance
R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. Stephen Gibbons & Stephen Machin & Olmo Silva, 2009. "Valuing School Quality Using Boundary Discontinuities," SERC Discussion Papers 0018, Spatial Economics Research Centre, LSE. [Downloadable!]
  3. Randall Reback, 2009. "Non-instructional Spending Improves Non-cognitive Outcomes:Discontinuity Evidence from a Unique Elementary School Counselor Financing System," Working Papers 0903, Barnard College, Department of Economics. [Downloadable!]
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