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Can improvements in schools spur neighborhood revitalization? Evidence from building investments

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  • Horn, Keren Mertens

Abstract

For most households in the U.S. the public school to which they send their children is tied to the geographic location of their home. Economic theory predicts that households take into account the quality of the public school when making residential decisions. A large body of literature has documented that school quality alters the demand for housing in a neighborhood as measured by the capitalization of school quality into house prices. Demand for schools may also affect the quality of the housing stock by creating incentives for property owners to better maintain their buildings and units. Exploration of this potential relationship has been absent from the discussion on how schools influence communities. I attempt to fill this gap through investigating the relationship between school quality and capital investments in the housing stock. To investigate whether a relationship exists between schools and property owner capital investment activity, I rely on detailed building level investment data in New York City as well as measures of school performance. I explore whether consistent measures of school performance are associated with higher levels of investment activity. To identify whether this relationship is causal, that good schools can spur investment activity, I incorporate a boundary discontinuity identification strategy. Further, I test whether households respond to changes in school performance, exploring whether improvements in test scores over a five-year period are associated with higher levels of residential investments. Finally, I control for differences in populations across attendance zone boundaries through incorporating information on the composition of students at each school. My results suggest a significant relationship between performance in math and English Language Arts and property owner capital investment behavior. In my preferred specification, I estimate that a one standard deviation improvement in test scores is associated with a 2.5 percent increase in dollars invested in a building.

Suggested Citation

  • Horn, Keren Mertens, 2015. "Can improvements in schools spur neighborhood revitalization? Evidence from building investments," Regional Science and Urban Economics, Elsevier, vol. 52(C), pages 108-118.
    • Handle: RePEc:eee:regeco:v:52:y:2015:i:c:p:108-118
    DOI: 10.1016/j.regsciurbeco.2015.03.004
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    References listed on IDEAS

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    Cited by:

    1. Sander Gerritsen & Bas ter Weel & Dinand Webbink, 2016. "Sorting around the discontinuity threshold: The case of a neighbourhood investment programme," CPB Discussion Paper 329.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Geoffrey K. Turnbull & Minrong Zheng, 2022. "Desegregation Litigation and School Quality Capitalization," The Journal of Real Estate Finance and Economics, Springer, vol. 64(2), pages 210-227, February.
    3. Sander Gerritsen & Dinand Webbink & Bas Weel, 2017. "Sorting Around the Discontinuity Threshold: The Case of a Neighbourhood Investment Programme," De Economist, Springer, vol. 165(1), pages 101-128, March.
    4. Gerritsen, Sander & Webbink, Dinand & ter Weel, Bas, 2016. "Sorting around the Discontinuity Threshold: The Case of a Neighbourhood Investment Programme," IZA Discussion Papers 9838, Institute of Labor Economics (IZA).
    5. Geoffrey K. Turnbull & Minrong Zheng, 2021. "A Meta‐Analysis of School Quality Capitalization in U.S. House Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(4), pages 1120-1171, December.
    6. Xu, Minhong & Xu, Yilan, 2021. "What happens when Airbnb comes to the neighborhood: The impact of home-sharing on neighborhood investment," Regional Science and Urban Economics, Elsevier, vol. 88(C).
    7. Sander Gerritsen & Bas ter Weel & Dinand Webbink, 2016. "Sorting around the discontinuity threshold: The case of a neighbourhood investment programme," CPB Discussion Paper 329, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    Keywords

    Residential investment; School performance; House prices;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • I2 - Health, Education, and Welfare - - Education
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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