IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/22668.html
   My bibliography  Save this paper

Public School Quality Valuation Over the Business Cycle

Author

Listed:
  • Stuart Gabriel
  • Owen Hearey
  • Matthew E. Kahn
  • Ryan K. Vaughn

Abstract

Over the years 2000 to 2013, the Los Angeles real estate market featured a boom, a bust, and then another boom. We use this variation to test how the hedonic valuation of school quality varies over the business cycle. Following Black (1999), we exploit a regression discontinuity design at elementary school attendance boundaries to test for how the implicit price of school quality changes. We find that the capitalization of school quality is counter-cyclical. While good schools always command a price premium, this premium grows during the bust. Possible mechanisms for these findings include consumers "trading down" from private to public schools during contractions as well as the effects of reduced household mobility during downturns in raising the value of the public school option.

Suggested Citation

  • Stuart Gabriel & Owen Hearey & Matthew E. Kahn & Ryan K. Vaughn, 2016. "Public School Quality Valuation Over the Business Cycle," NBER Working Papers 22668, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22668
    Note: CH ED
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w22668.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christopher Avery & Parag A. Pathak, 2021. "The Distributional Consequences of Public School Choice," American Economic Review, American Economic Association, vol. 111(1), pages 129-152, January.
    2. Charles T. Clotfelter & Helen F. Ladd & Jacob L. Vigdor, 2011. "Teacher Mobility, School Segregation, and Pay-Based Policies to Level the Playing Field," Education Finance and Policy, MIT Press, vol. 6(3), pages 399-438, July.
    3. Atif Mian & Amir Sufi, 2011. "House Prices, Home Equity-Based Borrowing, and the US Household Leverage Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 2132-2156, August.
    4. Kelly C. Bishop & Alvin D. Murphy, 2019. "Valuing Time-Varying Attributes Using the Hedonic Model: When Is a Dynamic Approach Necessary?," The Review of Economics and Statistics, MIT Press, vol. 101(1), pages 134-145, March.
    5. Hilber, Christian A.L. & Mayer, Christopher, 2009. "Why do households without children support local public schools? Linking house price capitalization to school spending," Journal of Urban Economics, Elsevier, vol. 65(1), pages 74-90, January.
    6. Jaimovich, Nir & Rebelo, Sergio & Wong, Arlene, 2019. "Trading down and the business cycle," Journal of Monetary Economics, Elsevier, vol. 102(C), pages 96-121.
    7. 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..
    8. Matthew T. Johnson, 2013. "The Impact of Business Cycle Fluctuations on Graduate School Enrollment," Mathematica Policy Research Reports 77da29f047574fbfb5f216d63, Mathematica Policy Research.
    9. Helen F. Ladd & Edward B. Fiske, 2008. "Handbook of Research in Education Finance and Policy," Education Finance and Policy, MIT Press, vol. 3(1), pages 149-150, January.
    10. Rodney Ramcharan & Stéphane Verani & Skander J. Van Den Heuvel, 2016. "From Wall Street to Main Street: The Impact of the Financial Crisis on Consumer Credit Supply," Journal of Finance, American Finance Association, vol. 71(3), pages 1323-1356, June.
    11. Veronica Guerrieri & Daniel Hartley & Erik Hurst, 2012. "Within-City Variation in Urban Decline: The Case of Detroit," American Economic Review, American Economic Association, vol. 102(3), pages 120-126, May.
    12. Dora L. Costa & Matthew E. Kahn, 2003. "The Rising Price of Nonmarket Goods," American Economic Review, American Economic Association, vol. 93(2), pages 227-232, May.
    13. Johnson, Matthew T., 2013. "The impact of business cycle fluctuations on graduate school enrollment," Economics of Education Review, Elsevier, vol. 34(C), pages 122-134.
    14. Gabriel Chodorow-Reich, "undated". "The Employment Effects of Credit Market Disruptions: Firm-level Evidence from the 2008-09 Financial Crisis," Working Paper 90811, Harvard University OpenScholar.
    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. Du, Xuejun & Huang, Zhonghua, 2018. "Spatial and temporal effects of urban wetlands on housing prices: Evidence from Hangzhou, China," Land Use Policy, Elsevier, vol. 73(C), pages 290-298.
    2. Xiao, Yue & Wen, Haizhen & Hui, Eddie C.M. & Zhou, Ganghua, 2022. "Dynamic capitalization effects of educational facilities during different market stages: An empirical study in Hangzhou, China," Land Use Policy, Elsevier, vol. 122(C).
    3. Amine Ouazad & Romain Rancière, 2019. "Market Frictions, Arbitrage, and the Capitalization of Amenities," NBER Working Papers 25701, National Bureau of Economic Research, Inc.
    4. Jee W. Hwang & Chun Kuang & Okmyung Bin, 2019. "Are all Homeowners Willing to Pay for Better Schools? ─ Evidence from a Finite Mixture Model Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 58(4), pages 638-655, May.
    5. Sumit Agarwal & Artashes Karapetyan, 2022. "Information Salience and Mispricing in Housing," Management Science, INFORMS, vol. 68(12), pages 9082-9106, December.

    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. Diamond, William & Landvoigt, Tim, 2022. "Credit cycles with market-based household leverage," Journal of Financial Economics, Elsevier, vol. 146(2), pages 726-753.
    2. William Diamond & Tim Landvoigt, 2019. "Credit Cycles with Market Based Household Leverage," 2019 Meeting Papers 162, Society for Economic Dynamics.
    3. Emil Verner & Győző Gyöngyösi, 2020. "Household Debt Revaluation and the Real Economy: Evidence from a Foreign Currency Debt Crisis," American Economic Review, American Economic Association, vol. 110(9), pages 2667-2702, September.
    4. 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.
    5. Brian C. Cadena & Brian K. Kovak, 2016. "Immigrants Equilibrate Local Labor Markets: Evidence from the Great Recession," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 257-290, January.
    6. Bednar, Steven & Gicheva, Dora, 2013. "Tax benefits for graduate education: Incentives for whom?," Economics of Education Review, Elsevier, vol. 36(C), pages 181-197.
    7. John I. Carruthers & Gordon F. Mulligan, 2013. "Through the Crisis," Economic Development Quarterly, , vol. 27(2), pages 124-143, May.
    8. Patrick Kehoe & Pierlauro Lopez & Virgiliu Midrigan & Elena Pastorino, 2020. "On the Importance of Household versus Firm Credit Frictions in the Great Recession," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 37, pages 34-67, August.
    9. Erica Blom & Brian C. Cadena & Benjamin J. Keys, 2021. "Investment over the Business Cycle: Insights from College Major Choice," Journal of Labor Economics, University of Chicago Press, vol. 39(4), pages 1043-1082.
    10. David Wolf & Kenji Takeuchi, 2022. "Who Gives a Dam? Capitalization of Flood Protection in Fukuoka, Japan," Discussion Papers 2203, Graduate School of Economics, Kobe University.
    11. Piazzesi, M. & Schneider, M., 2016. "Housing and Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1547-1640, Elsevier.
    12. Jiang, Boqian, 2018. "Homeownership and voter turnout in u.s. local elections," Journal of Housing Economics, Elsevier, vol. 41(C), pages 168-183.
    13. Ronan Lyons, 2012. "Inside a bubble and crash: Evidence from the valuation of amenities," ERES eres2012_065, European Real Estate Society (ERES).
    14. Stumpner, Sebastian, 2019. "Trade and the geographic spread of the great recession," Journal of International Economics, Elsevier, vol. 119(C), pages 169-180.
    15. Paul Cheshire & Stephen Sheppard, 2004. "Capitalising the Value of Free Schools: The Impact of Supply Characteristics and Uncertainty," Economic Journal, Royal Economic Society, vol. 114(499), pages 397-424, November.
    16. Fumihiko Suga, 2020. "The returns to postgraduate education in Japan," The Japanese Economic Review, Springer, vol. 71(4), pages 571-596, October.
    17. Guo, Minjie & McDermott, John, 2020. "Sovereign debt and the length of economic depressions," Economic Modelling, Elsevier, vol. 90(C), pages 79-91.
    18. Clément Bellet, 2017. "Essays on inequality, social preferences and consumer behavior [Inégalités, préférences sociales et comportement du consommateur]," SciencePo Working papers Main tel-03455045, HAL.
    19. Klaiber, H. Allen, 2014. "Migration and household adaptation to climate: A review of empirical research," Energy Economics, Elsevier, vol. 46(C), pages 539-547.
    20. Meri Davlasheridze & Qin Fan, 2019. "Valuing Seawall Protection in the Wake of Hurricane Ike," Economics of Disasters and Climate Change, Springer, vol. 3(3), pages 257-279, October.

    More about this item

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

    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:nbr:nberwo:22668. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.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.