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Does the Housing Market React to New Information on School Quality?

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  • Jon H. Fiva
  • Lars J. Kirkebøen

Abstract

This paper analyzes housing market reactions to the release of previously unpublished information on school quality. Using the sharp discontinuity in the information environment allows us to study price changes within school catchment areas, thus controlling for neighborhood unobservables. We find a substantial housing market reaction to publication of school quality indicators, suggesting that households care about school quality, and may be willing to pay for better schools. The publication effect is robust to a number of sensitivity checks, but does not seem to be permanent as prices revert to prepublication levels after two to three months. We discuss this reversion in relation to the literature on behavioral finance and the concept of limited attention.

Suggested Citation

  • Jon H. Fiva & Lars J. Kirkebøen, 2008. "Does the Housing Market React to New Information on School Quality?," CESifo Working Paper Series 2299, CESifo.
    • Handle: RePEc:ces:ceswps:_2299
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    Cited by:

    1. Feng, Hao & Lu, Ming, 2013. "School quality and housing prices: Empirical evidence from a natural experiment in Shanghai, China," Journal of Housing Economics, Elsevier, vol. 22(4), pages 291-307.
    2. 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.
    3. Ishtiaq P. Mahmood & Hongjin Zhu & Akbar Zaheer, 2017. "Centralization of intragroup equity ties and performance of business group affiliates," Strategic Management Journal, Wiley Blackwell, vol. 38(5), pages 1082-1100, May.
    4. Nguyen-Hoang, Phuong & Yinger, John, 2011. "The capitalization of school quality into house values: A review," Journal of Housing Economics, Elsevier, vol. 20(1), pages 30-48, March.
    5. Michael Insler & Kurtis Swope, 2016. "School Quality, Residential Choice, and the U.S. Housing Bubble," Housing Policy Debate, Taylor & Francis Journals, vol. 26(1), pages 53-79, January.

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    More about this item

    Keywords

    valuation of school quality; hedonic methods; price reversion;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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