Capitalization of Parent, School, and Peer Group Components of School Quality into House Price

34 Pages Posted: 23 Feb 2001

See all articles by Donald R. Haurin

Donald R. Haurin

Ohio State University (OSU) - Economics

David M. Brasington

University of Cincinnati - Department of Economics

Date Written: January 7, 2005

Abstract

We test competing models of how K-12 public school quality is capitalized into house prices. The value added model proposes that only locationally fixed district-specific factors such as inputs to schooling and the characteristics of student peers are capitalized into house prices. This model claims that portable inputs to student outcomes, such as parental inputs, are not capitalized. A competing model argues that value added is not easily observed; rather, educational outcomes such as proficiency test scores and expenditures per pupil are easily observed and are capitalized into house prices. Based on our study of 123 school districts and 27,000 house transactions, we find no support for the value added model. Instead we find that the district's average proficiency test scores and real expenditures per pupil influence households' valuations of their local public schools.

Keywords: House price, hedonic model, capitalization, school quality, value added

JEL Classification: I2, N3, R21

Suggested Citation

Haurin, Donald R. and Brasington, David M., Capitalization of Parent, School, and Peer Group Components of School Quality into House Price (January 7, 2005). Available at SSRN: https://ssrn.com/abstract=257641 or http://dx.doi.org/10.2139/ssrn.257641

Donald R. Haurin (Contact Author)

Ohio State University (OSU) - Economics ( email )

154 N. Oval Mall
1010G Derby Hall
Columbus, OH 43210-1172
United States
614-292-0482 (Phone)
614-292-9530 (Fax)

David M. Brasington

University of Cincinnati - Department of Economics ( email )

Carl H. Lindner Hall 2925 Campus Green Drive
PO Box 0371
Cincinnati, OH 45221-0211
United States

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