Public School Quality Valuation Over the Business Cycle

37 Pages Posted: 19 Sep 2016

See all articles by Stuart A. Gabriel

Stuart A. Gabriel

University of California, Los Angeles - Anderson School of Management

Owen Hearey

University of California, Los Angeles (UCLA) - Department of Economics

Matthew E. Kahn

University of Southern California; National Bureau of Economic Research (NBER)

Ryan Vaughn

University of California, Los Angeles (UCLA)

Date Written: September 14, 2016

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.

Keywords: Amenities, Business cycles, Hedonic estimation, Housing demand, Public schools

JEL Classification: E32, I20, R21

Suggested Citation

Gabriel, Stuart A. and Hearey, Owen and Kahn, Matthew E. and Vaughn, Ryan, Public School Quality Valuation Over the Business Cycle (September 14, 2016). Available at SSRN: https://ssrn.com/abstract=2839396 or http://dx.doi.org/10.2139/ssrn.2839396

Stuart A. Gabriel (Contact Author)

University of California, Los Angeles - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
310-825-2922 (Phone)
310-206-5455 (Fax)

HOME PAGE: http://www.anderson.ucla.edu

Owen Hearey

University of California, Los Angeles (UCLA) - Department of Economics ( email )

8283 Bunche Hall
Los Angeles, CA 90095-1477
United States

Matthew E. Kahn

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ryan Vaughn

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

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