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What's in a Grade? School Report Cards and House Prices

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  • David N. Figlio
  • Maurice E. Lucas

Abstract

Throughout the last decade, many states around the country have begun making public student test scores or other evaluative measures of school quality available to the general public. The most recent trends in state policies under consideration, already enacted in Florida and a n major component of George W. Bush's education platform, involve the assignment of letter grades to rate school quality. Because school quality is one of a group of local public goods purchased along with a house, one would anticipate that additional information about school quality would capitalize into real estate values. This paper takes the first look at the role that this type of added information plays in the capitalization of school quality measures. We use rich student test score and housing value data from a medium-sized Florida school district, one of the nation's 200 largest, to directly investigate this link. Using data on repeat sales of properties before and after the assignment of school letter grades, we find significant evidence that arbitrary distinctions embedded in school report cards lead to major housing price effects.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8019.

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Date of creation: Nov 2000
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Publication status: published as Figlio, David N. and Maurice E. Lucas. "What's In A Grade? School Report Cards And The Housing Market," American Economic Review, 2004, v94(3,Jun), 591-604.
Handle: RePEc:nbr:nberwo:8019

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References

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  1. Sandra E. Black, 1997. "Do better schools matter? Parental valuation of elementary education," Research Paper 9729, Federal Reserve Bank of New York.
  2. Brunner, Eric & Sonstelie, Jon & Thayer, Mark, 2001. "Capitalization and the Voucher: An Analysis of Precinct Returns from California's Proposition 174," Journal of Urban Economics, Elsevier, vol. 50(3), pages 517-536, November.
  3. Brown, Byron W & Saks, Daniel H, 1975. "The Production and Distribution of Cognitive Skills within Schools," Journal of Political Economy, University of Chicago Press, vol. 83(3), pages 571-93, June.
  4. 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.
  5. 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.
  6. Bogart, William T. & Cromwell, Brian A., 2000. "How Much Is a Neighborhood School Worth?," Journal of Urban Economics, Elsevier, vol. 47(2), pages 280-305, March.
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Cited by:
  1. Michael T. Owyang & Abbigail J Chiodo & Ruben Hernandez-Murillo, 2004. "Nonlinear Hedonics and the Search for School District Quality," Econometric Society 2004 North American Summer Meetings 276, Econometric Society.
  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.
  3. David N. Figlio & Lawrence S. Getzler, 2002. "Accountability , Ability and Disability: Gaming the System," NBER Working Papers 9307, National Bureau of Economic Research, Inc.
  4. Brian A. Jacob & Lars Lefgren, 2005. "Principals as Agents: Subjective Performance Measurement in Education," NBER Working Papers 11463, National Bureau of Economic Research, Inc.
  5. Velma Zahirovic-Herbert & Geoffrey Turnbull, 2008. "School Quality, House Prices and Liquidity," The Journal of Real Estate Finance and Economics, Springer, vol. 37(2), pages 113-130, August.
  6. Areendam Chanda, 2002. "Can Skill Biased Technological Progress Have a Role in the Decline of the Savings Rate?," Macroeconomics 0202004, EconWPA.
  7. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2003. "A Unified Framework for Estimating Preferences for Schools and Neighborhoods," Working Papers 872, Economic Growth Center, Yale University.
  8. Thomas J. Kane & Douglas O. Staiger & Stephanie K. Riegg, 2005. "School Quality, Neighborhoods and Housing Prices: The Impacts of school Desegregation," NBER Working Papers 11347, National Bureau of Economic Research, Inc.
  9. Stoddard, Christiana & Kuhn, Peter J., 2004. "Incentives and Effort in the Public Sector: Have U.S. Education Reforms Increased Teachers’ Work Hours?," IZA Discussion Papers 1412, Institute for the Study of Labor (IZA).
  10. Eric A. Hanushek & Margaret E. Raymond, 2002. "Improving educational quality: how best to evaluate our schools," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 47(Jun), pages 193-247.

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