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Tiebout Sorting, Social Multipliers and the Demand for School Quality

Author

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  • Patrick Bayer
  • Fernando Ferreira
  • Robert McMillan

Abstract

In many theoretical public finance models, school quality plays a central role as a determinant of household location choices and in turn, of neighborhood stratification. In contrast, the recent empirical literature has almost universally concluded that the direct effect of school quality on housing demand is weak, a conclusion that is robust across a variety of research designs. Using an equilibrium model of residential sorting, this paper closes the gap between these literatures, providing clear evidence that the full effect of school quality on residential sorting is significantly larger than the direct effect -- four times as great for education stratification, twice for income stratification. This is due to a strong social multiplier associated with heterogeneous preferences for peers and neighbors; initial changes in school quality set in motion a process of re-sorting on the basis of neighborhood characteristics that reinforces itself, giving rise to substantially larger stratification effects.

Suggested Citation

  • Patrick Bayer & Fernando Ferreira & Robert McMillan, 2004. "Tiebout Sorting, Social Multipliers and the Demand for School Quality," NBER Working Papers 10871, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10871
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    References listed on IDEAS

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    1. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation of Elementary Education," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 577-599.
    2. Ferreira, Fernando, 2010. "You can take it with you: Proposition 13 tax benefits, residential mobility, and willingness to pay for housing amenities," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 661-673, October.
    3. Nechyba, Thomas J, 1999. " School Finance Induced Migration and Stratification Patterns: The Impact of Private School Vouchers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 5-50.
    4. Epple, Dennis & Figlio, David & Romano, Richard, 2004. "Competition between private and public schools: testing stratification and pricing predictions," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1215-1245, July.
    5. 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.
    6. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August.
    7. Caroline M. Hoxby, 2000. "Does Competition among Public Schools Benefit Students and Taxpayers?," American Economic Review, American Economic Association, vol. 90(5), pages 1209-1238, December.
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    12. Patrick Bayer & Robert McMillan & Kim Rueben, 2004. "An Equilibrium Model of Sorting in an Urban Housing Market," NBER Working Papers 10865, National Bureau of Economic Research, Inc.
    13. Julie Berry Cullen & Brian A. Jacob & Steven Levitt, 2003. "The Effect of School Choice on Student Outcomes: Evidence from Randomized Lotteries," NBER Working Papers 10113, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Francisco Gallego & Andrés Hernando, 2009. "School Choice in Chile: Looking at the Demand Side," Documentos de Trabajo 356, Instituto de Economia. Pontificia Universidad Católica de Chile..
    2. 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.
    3. Reback, Randall, 2008. "Demand (and supply) in an inter-district public school choice program," Economics of Education Review, Elsevier, vol. 27(4), pages 402-416, August.
    4. Fack, Gabrielle & Grenet, Julien, 2010. "When do better schools raise housing prices? Evidence from Paris public and private schools," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 59-77, February.
    5. Wada, Roy & Herbert, Zahirovic-Herbert, 2009. "Distribution of Demand for School Quality: Evidence from Quantile Regression," MPRA Paper 18078, University Library of Munich, Germany.
    6. Stephanie Riegg Cellini & Fernando Ferreira & Jesse Rothstein, 2008. "The Value of School Facilities: Evidence from a Dynamic Regression Discontinuity Design," Working Papers 1104, Princeton University, Woodrow Wilson School of Public and International Affairs, Education Research Section..
    7. Jeffrey Zabel, 2014. "Unintended Consequences: The Impact of Proposition 2½ Overrides on School Segregation in Massachusetts," Education Finance and Policy, MIT Press, vol. 9(4), pages 481-514, October.
    8. Yannis M. Ioannides, 2010. "Neighborhood Effects and Housing," Discussion Papers Series, Department of Economics, Tufts University 0747, Department of Economics, Tufts University.
    9. Corey Lang, 2012. "The Dynamics of House Price Capitalization and Locational Sorting: Evidence from Air Quality Changes," Working Papers 12-22, Center for Economic Studies, U.S. Census Bureau.
    10. Brunner, Eric J. & Cho, Sung-Woo & Reback, Randall, 2012. "Mobility, housing markets, and schools: Estimating the effects of inter-district choice programs," Journal of Public Economics, Elsevier, vol. 96(7), pages 604-614.
    11. Mark van Duijn & Jan Rouwendal, 2015. "Sorting based on Urban Heritage and Income: Evidence from the Amsterdam Metropolitan Area," Tinbergen Institute Discussion Papers 15-030/VIII, Tinbergen Institute, revised 19 Mar 2018.
    12. repec:pri:cepsud:180rothstein is not listed on IDEAS
    13. 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.
    14. Zhiling Wang & Thomas de Graaff & Peter Nijkamp, 2014. "The choice of migration destinations: cultural diversity versus cultural distance," ERSA conference papers ersa14p1147, European Regional Science Association.
    15. Eric J. Brunner & Jennifer Imazeki, 2006. "Tiebout Choice and the Voucher," Working papers 2006-10, University of Connecticut, Department of Economics.
    16. Oliver Himmler, 2009. "The Effects of School Competition on Academic Achievement and Grading Standards," CESifo Working Paper Series 2676, CESifo Group Munich.
    17. Zhang, Zhaohua & Hite, Diane, 2015. "House Value, Crime and Residential Location Choice," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196826, Southern Agricultural Economics Association.
    18. Zhiling Wang & Thomas De Graaff & Peter Nijkamp, 2016. "Cultural Diversity and Cultural Distance as Choice Determinants of Migration Destination," Spatial Economic Analysis, Taylor & Francis Journals, vol. 11(2), pages 176-200, June.
    19. Hugh Macartney & John D. Singleton, 2017. "School Boards and Student Segregation," NBER Working Papers 23619, National Bureau of Economic Research, Inc.
    20. Leigh L. Linden & Jonah E. Rockoff, 2006. "There Goes the Neighborhood? Estimates of the Impact of Crime Risk on Property Values From Megan's Laws," NBER Working Papers 12253, National Bureau of Economic Research, Inc.
    21. Cornelissen Thomas & Jirjahn Uwe & Tsertsvadze Georgi, 2008. "Parental Background and Earnings: German Evidence on Direct and Indirect Relationships," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 554-572, October.
    22. Eric J. Brunner & Jon Sonstelie, 2006. "California's School Finance Reform: An Experiment in Fiscal Federalism," Working papers 2006-09, University of Connecticut, Department of Economics.

    More about this item

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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