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How Much Do Public Schools Really Cost? Estimating the Relationship Between House Prices and School Quality

  • Ian Davidoff
  • Andrew Leigh

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 percent increase in test scores (approximately one standard deviation) is associated with a 3.5 percent increase in house prices. Our result is in line with private school tuition costs, and accords with prior research from Britain and the United States. Estimating the effect of school quality on house prices provides a possible measure of the extent to which parents value better educational outcomes.

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File URL: https://www.cbe.anu.edu.au/researchpapers/cepr/DP558.pdf
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Paper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 558.

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Date of creation: Jul 2007
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Handle: RePEc:auu:dpaper:558
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  1. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  2. Sandra E. Black, 1997. "Do better schools matter? Parental valuation of elementary education," Research Paper 9729, Federal Reserve Bank of New York.
  3. Steve Bradley & Mirko Draca & Colin Green, 2004. "School Performance in Australia: Is There a Role for Quasi-Markets?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(3), pages 271-286, 09.
  4. 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.
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