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When do Better Schools Raise Housing Prices? Evidence from Paris Public and Private Schools

  • Gabrielle Fack
  • Julien Grenet

In this paper, we investigate how housing prices react to the quality of education offered by neighbouring public and private schools. The organization of secondary schooling in the city of Paris, which combines residence-based-assignment to public schools with a well-developed and almost entirely publicly funded private school system, offers a valuable empirical context for analyzing how private schools affect the capitalization of public school performance in housing prices. Using comprehensive data on both schools and real estate transact ions over the period 1997-2004, we develop a matching framework to carefully compare sales across school attendance boundaries. We find that a standard deviation increase in public school performance raises housing prices by 1.4 to 2.4%. Moreover, we show that the capitalization of public school performance in the price of real estate shrinks as the availability of private schools increases in the neighbourhood. Our results confirm the predictions of general equilibrium models of school choice that private schools, by providing an advantageous outside option to parents, tend to mitigate the impact of public school performance on housing prices.

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Paper provided by Centre for the Economics of Education, LSE in its series CEE Discussion Papers with number 0119.

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Date of creation: Oct 2010
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Handle: RePEc:cep:ceedps:0119
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