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How Much do Public Schools Really Cost? Estimating the Relationship between House Prices and School Quality

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  • IAN DAVIDOFF
  • ANDREW LEIGH

Abstract

This paper investigates the relationship between housing prices and the quality of public schools in the Australian Capital Territory. To disentangle the effects of schools and other neighbourhood characteristics on the value of residential properties, we compare sale prices of homes on either side of high school attendance boundaries. We find that a 5 percentage point increase in test scores (approximately 1 SD) is associated with a 3.5 per cent increase in house prices. Our result is in line with private school tuition costs, and accords with prior research from the UK and the USA. Estimating the effect of school quality on house prices provides a possible measure of the extent to which parents value better educational outcomes.

Suggested Citation

  • Ian Davidoff & Andrew Leigh, 2008. "How Much do Public Schools Really Cost? Estimating the Relationship between House Prices and School Quality," The Economic Record, The Economic Society of Australia, vol. 84(265), pages 193-206, June.
    • Handle: RePEc:bla:ecorec:v:84:y:2008:i:265:p:193-206
    DOI: 10.1111/j.1475-4932.2008.00462.x
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    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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