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The capitalization of school quality in rents in the Beijing housing market: A propensity score method

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  • Song, Zisheng

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

Abstract

The capitalization of education resources in housing prices has been widely discussed, however, insufficient attention is paid to its capitalization in rents. This paper mainly aims to identify the capitalization of school quality in rents using 49,438 rental transaction data points from 2016 to 2018 in Beijing, China. In addition, we introduce the propensity score method (PSM) to reduce the sample selection bias and estimate a hedonic treatment effects model by regarding the high-quality school as a treatment within a 750-meter radius neighborhood of rental housing. Our findings reveal that school quality can be significantly capitalized in rents, and that this capitalization varies across not only school quality (ranking) but also space and time. Within rental neighborhoods, high-quality school density can significantly moderate the nearest school’s capitalization, promoting a 3.5% capitalization increase in outer municipal districts but a 3% decrease of top-ranked schools’ capitalization effect in inner municipalities. Further, we investigate school capitalization’s spatial dependency and find that top-ranked schools cannot be significantly capitalized in the rent of outer municipal areas due to existing tenant discrimination. Third-ranked schools can be capitalized into the rent of inner municipalities, probably because of other exogenous factors (e.g., housing prices, public transit). In addition, equitable housing policy shows the potential failure in the municipalities concerning high competition for top schools, as increasing school capitalization that might worsen social inequality between homeowners and renters. In contrast, the policy may remedy school capitalization in less competitive municipalities for high-quality schools.

Suggested Citation

  • Song, Zisheng, 2021. "The capitalization of school quality in rents in the Beijing housing market: A propensity score method," Working Paper Series 21/7, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    • Handle: RePEc:hhs:kthrec:2021_007
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    rental housing; school capitalization; propensity score method (PSM); neighborhood school density;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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