IDEAS home Printed from https://ideas.repec.org/p/fip/fedlwp/2003-039.html
   My bibliography  Save this paper

Nonlinear hedonics and the search for school district quality

Author

Listed:
  • Abbigail J. Chiodo
  • Ruben Hernandez-Murillo
  • Michael T. Owyang

Abstract

A school?s quality is often inferred from the premium a parent must pay to buy a house associated with a better school. Isolating this effect, however, is difficult because better schools also tend to be located in nicer neighborhoods and, therefore, cost more for reasons other than school quality. Although recent work has been relatively successful in isolating this effect, it is limited to the extent that it assumes a linear effect of schools on housing prices. We examine this relationship and find that the premium for school quality is nonlinear: There is a premium for houses in better school attendance zones, but there is no penalty for houses in worse school attendance zones. Our results suggest that previous studies have undervalued parents? willingness to pay for high-quality public schools, which, we argue, is attributable to underestimating the degree of heterogeneity in parental preferences.

Suggested Citation

  • Abbigail J. Chiodo & Ruben Hernandez-Murillo & Michael T. Owyang, 2005. "Nonlinear hedonics and the search for school district quality," Working Papers 2003-039, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2003-039
    as

    Download full text from publisher

    File URL: http://research.stlouisfed.org/wp/more/2003-039/
    Download Restriction: no

    File URL: http://research.stlouisfed.org/wp/2003/2003-039.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation of Elementary Education," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 577-599.
    2. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
    3. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 588-638, August.
    4. Mortensen, Dale T & Pissarides, Christopher A, 1999. "Unemployment Responses to 'Skill-Biased' Technology Shocks: The Role of Labour Market Policy," Economic Journal, Royal Economic Society, vol. 109(455), pages 242-265, April.
    5. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-1292, December.
    6. den Haan, Wouter J. & Ramey, Garey & Watson, Joel, 2000. "Job destruction and the experiences of displaced workers," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 52(1), pages 87-128, June.
    7. 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.
    8. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    9. Weimer, David L. & Wolkoff, Michael J., 2001. "School Performance and Housing Values: Using Non-Contiguous District and Incorporation Boundaries to Identify School Effects," National Tax Journal, National Tax Association, vol. 54(n. 2), pages 231-54, June.
    10. David N. Figlio & Maurice E. Lucas, 2000. "What's in a Grade? School Report Cards and House Prices," NBER Working Papers 8019, National Bureau of Economic Research, Inc.
    11. Eric A. Hanushek, 1996. "Measuring Investment in Education," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 9-30, Fall.
    12. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    13. Weimer, David L. & Wolkoff, Michael J., 2001. "School Performance and Housing Values: Using Non-Contiguous District and Incorporation Boundaries to Identify School Effects," National Tax Journal, National Tax Association;National Tax Journal, vol. 54(2), pages 231-254, June.
    14. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    15. Bogart, William T. & Cromwell, Brian A., 1997. "How Much More Is a Good School District Worth?," National Tax Journal, National Tax Association;National Tax Journal, vol. 50(2), pages 215-232, June.
    16. Betts, Julian R, 1995. "Does School Quality Matter? Evidence from the National Longitudinal Survey of Youth," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 231-250, May.
    17. 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.
    18. Christian A. L. Hilber & Christopher J. Mayer, "undated". "Land Supply, House Price Capitalization, and Local Spending on Schools," Zell/Lurie Center Working Papers 392, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
    19. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Brasington & Donald R. Haurin, 2006. "Educational Outcomes and House Values: A Test of the value added Approach," Journal of Regional Science, Wiley Blackwell, vol. 46(2), pages 245-268, May.
    2. Strauss, Jack, 2013. "The Economic Gains to Colorado of Amendment 66," MPRA Paper 49928, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Downes, Thomas A. & Zabel, Jeffrey E., 2002. "The impact of school characteristics on house prices: Chicago 1987-1991," Journal of Urban Economics, Elsevier, vol. 52(1), pages 1-25, July.
    2. Clapp, John M. & Nanda, Anupam & Ross, Stephen L., 2008. "Which school attributes matter? The influence of school district performance and demographic composition on property values," Journal of Urban Economics, Elsevier, vol. 63(2), pages 451-466, March.
    3. Theodore M. Crone, 2006. "Capitalization of the quality of local public schools: what do home buyers value?," Working Papers 06-15, Federal Reserve Bank of Philadelphia.
    4. John Glen & Joseph G. Nellis, 2010. "“The Price You Pay”: The Impact of State-Funded Secondary School Performance on Residential Property Values in England," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(4), pages 405-428, December.
    5. Margaret Brehm & Scott A. Imberman & Michael Naretta, 2017. "Capitalization of Charter Schools into Residential Property Values," Education Finance and Policy, MIT Press, vol. 12(1), pages 1-27, Winter.
    6. Paul Carrillo & Stephanie R. Cellini & Richard K. Green, 2013. "School Quality And Information Disclosure: Evidence From The Housing Market," Economic Inquiry, Western Economic Association International, vol. 51(3), pages 1809-1828, July.
    7. Chugunov, D., 2013. "Impact of School Quality and Neighborhoods on Housing Prices in Moscow," Journal of the New Economic Association, New Economic Association, vol. 17(1), pages 87-112.
    8. Yi Huang & Sandy Dall’erba, 2021. "Does Proximity to School Still Matter Once Access to Your Preferred School Zone Has Already Been Secured?," The Journal of Real Estate Finance and Economics, Springer, vol. 62(4), pages 548-577, May.
    9. Lawrence Kessler & Murat Munkin, 2015. "Bayesian estimation of panel data fractional response models with endogeneity: an application to standardized test rates," Empirical Economics, Springer, vol. 49(1), pages 81-114, August.
    10. Yadavalli, Anita P. & Florax, Raymond J.G.M., 2013. "The Effect of School Quality on House Prices: A Meta-Regression Analysis," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151291, Agricultural and Applied Economics Association.
    11. Dhar, Paramita & Ross, Stephen L, 2012. "School district quality and property values: Examining differences along school district boundaries," Journal of Urban Economics, Elsevier, vol. 71(1), pages 18-25.
    12. Sylvia Y He, 2017. "A hierarchical estimation of school quality capitalisation in house prices in Orange County, California," Urban Studies, Urban Studies Journal Limited, vol. 54(14), pages 3337-3359, November.
    13. Feng, Hao & Lu, Ming, 2013. "School quality and housing prices: Empirical evidence from a natural experiment in Shanghai, China," Journal of Housing Economics, Elsevier, vol. 22(4), pages 291-307.
    14. Christian A. L. Hilber & Christopher J. Mayer, 2004. "Why Do Households Without Children Support Local Public Schools?," NBER Working Papers 10804, National Bureau of Economic Research, Inc.
    15. Joshua Hall, 2017. "Does school district and municipality border congruence matter?," Urban Studies, Urban Studies Journal Limited, vol. 54(7), pages 1601-1618, May.
    16. Diana Mok & Ling‐Hin Li, 2010. "The Spatial Impact of Language Policies on the Marginal Bids for English Education in Hong Kong," Growth and Change, Wiley Blackwell, vol. 41(4), pages 556-587, December.
    17. Christian A. L. Hilber, 2017. "The Economic Implications of House Price Capitalization: A Synthesis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(2), pages 301-339, April.
    18. Stephen Machin & Kjell G. Salvanes, 2016. "Valuing School Quality via a School Choice Reform," Scandinavian Journal of Economics, Wiley Blackwell, vol. 118(1), pages 3-24, January.
    19. Meghir, Costas & Rivkin, Steven, 2011. "Econometric Methods for Research in Education," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 3, chapter 1, pages 1-87, Elsevier.
    20. John Yinger, 2009. "Hedonic Markets and Explicit Demands: Bid-Function Envelopes for Public Services, Neighborhood Amenities, and Commuting Costs," Center for Policy Research Working Papers 114, Center for Policy Research, Maxwell School, Syracuse University.

    More about this item

    Keywords

    Econometric models; Education; Regional economics;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • I20 - Health, Education, and Welfare - - Education - - - General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:2003-039. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anna Oates (email available below). General contact details of provider: https://edirc.repec.org/data/frbslus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.