IDEAS home Printed from https://ideas.repec.org/p/hhs/kthrec/2021_007.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.diva-portal.org/smash/record.jsf?pid=diva2:1615996
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stephen Machin, 2011. "Houses and Schools: Valuation of School Quality through then Housing Market - EALE 2010 Presidential Address," CEP Occasional Papers 29, Centre for Economic Performance, LSE.
    2. Mats Wilhelmsson, 2019. "Energy Performance Certificates and Its Capitalization in Housing Values in Sweden," Sustainability, MDPI, vol. 11(21), pages 1-16, November.
    3. Mengkai Chen & Yidong Wu & Guiwen Liu & Xianzhu Wang, 2020. "City economic development, housing availability, and migrants' settlement intentions: Evidence from China," Growth and Change, Wiley Blackwell, vol. 51(3), pages 1239-1258, September.
    4. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    5. Enström Öst, Cecilia & Wilhelmsson, Mats, 2019. "The long-term consequences of youth housing for childbearing and higher education," Journal of Policy Modeling, Elsevier, vol. 41(5), pages 845-858.
    6. 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.
    7. Keith Kranker & Laura Blue & Lauren Vollmer Forrow, 2021. "Improving Effect Estimates by Limiting the Variability in Inverse Propensity Score Weights," The American Statistician, Taylor & Francis Journals, vol. 75(3), pages 276-287, July.
    8. Machin, Stephen, 2011. "Houses and schools: Valuation of school quality through the housing market," Labour Economics, Elsevier, vol. 18(6), pages 723-729.
    9. Vincenzo Verardi & Christophe Croux, 2009. "Robust regression in Stata," Stata Journal, StataCorp LP, vol. 9(3), pages 439-453, September.
    10. 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.
    11. David M. Brasington, 2002. "The Demand for Local Public Goods: The Case of Public School Quality," Public Finance Review, , vol. 30(3), pages 163-187, May.
    12. Eli Beracha & William G. Hardin, 2018. "The Capitalization of School Quality into Renter and Owner Housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 46(1), pages 85-119, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xiao, Yue & Wen, Haizhen & Hui, Eddie C.M. & Zhou, Ganghua, 2022. "Dynamic capitalization effects of educational facilities during different market stages: An empirical study in Hangzhou, China," Land Use Policy, Elsevier, vol. 122(C).
    2. Peng, Ying & Tian, Chuanhao & Wen, Haizhen, 2021. "How does school district adjustment affect housing prices: An empirical investigation from Hangzhou, China," China Economic Review, Elsevier, vol. 69(C).
    3. van Vuuren, Aico, 2022. "Is There a Diminishing Value of Urban Amenities as a Result of the COVID-19 Pandemic?," IZA Discussion Papers 15025, Institute of Labor Economics (IZA).
    4. Biel E. Metz, 2015. "Effect of Distance to Schooling on Home Prices," The Review of Regional Studies, Southern Regional Science Association, vol. 45(2), pages 151-171, Fall.
    5. Rajapaksa, Darshana & Gono, Marcel & Wilson, Clevo & Managi, Shunsuke & Lee, Boon & Hoang, Viet-Ngu, 2020. "The demand for education: The impacts of good schools on property values in Brisbane, Australia," Land Use Policy, Elsevier, vol. 97(C).
    6. Muñoz-Morales, Juan & Singh, Ruchi, 2023. "Do school shootings erode property values?," Regional Science and Urban Economics, Elsevier, vol. 98(C).
    7. Mathilde Poulhes, 2017. "From Latin Quarter to Montmartre Investigating Parisian Real-Estate Prices," Working Papers 2017-13, Center for Research in Economics and Statistics.
    8. Yoojin Yi & Euijune Kim & Eunjin Choi, 2017. "Linkage among School Performance, Housing Prices, and Residential Mobility," Sustainability, MDPI, vol. 9(6), pages 1-18, June.
    9. Tong, Jian & Zhang, Cong & Yue, Tong & Bai, Yanfeng & Shao, Lei, 2024. "The distributional effects of introducing a lottery system in school assignment rule: Evidence from an experiment in Beijing, China," International Journal of Educational Development, Elsevier, vol. 107(C).
    10. Schwartz, Amy Ellen & Voicu, Ioan & Horn, Keren Mertens, 2014. "Do choice schools break the link between public schools and property values? Evidence from house prices in New York City," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 1-10.
    11. Baron, Aneil & Zhang, Wendong & Irwin, Elena, 2016. "Estimating the Capitalization Effects of Harmful Algal Bloom Incidence, Intensity and Duration? A Repeated Sales Model of Lake Erie Lakefront Property Values," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236589, Agricultural and Applied Economics Association.
    12. Lai, Yani & Zheng, Xian & Choy, Lennon H.T. & Wang, Jiayuan, 2017. "Property rights and housing prices: An empirical study of small property rights housing in Shenzhen, China," Land Use Policy, Elsevier, vol. 68(C), pages 429-437.
    13. Agarwal, Sumit & Rengarajan, Satyanarain & Sing, Tien Foo & Yang, Yang, 2016. "School allocation rules and housing prices: A quasi-experiment with school relocation events in Singapore," Regional Science and Urban Economics, Elsevier, vol. 58(C), pages 42-56.
    14. Gibbons, Stephen & Machin, Stephen & Silva, Olmo, 2013. "Valuing school quality using boundary discontinuity," LSE Research Online Documents on Economics 45246, London School of Economics and Political Science, LSE Library.
    15. Hu, Lirong & He, Shenjing & Luo, Yun & Su, Shiliang & Xin, Jing & Weng, Min, 2020. "A social-media-based approach to assessing the effectiveness of equitable housing policy in mitigating education accessibility induced social inequalities in Shanghai, China," Land Use Policy, Elsevier, vol. 94(C).
    16. Yinger, John, 2015. "Hedonic markets and sorting equilibria: Bid-function envelopes for public services and neighborhood amenities," Journal of Urban Economics, Elsevier, vol. 86(C), pages 9-25.
    17. Yuta Kuroda, 2022. "What does the disclosure of school quality information bring? The effect through the housing market," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 125-149, January.
    18. Brasington, D. M., 2003. "The supply of public school quality," Economics of Education Review, Elsevier, vol. 22(4), pages 367-377, August.
    19. David M. Brasington & Diane Hite, 2005. "Demand for Environmental Quality: A Spatial Hedonic Approach," Departmental Working Papers 2005-08, Department of Economics, Louisiana State University.
    20. Chen, Jing & Li, Rui, 2023. "Pay for elite private schools or pay for higher housing prices? Evidence from an exogenous policy shock," Journal of Housing Economics, Elsevier, vol. 60(C).

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:kthrec:2021_007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Cecilia Hermansson (email available below). General contact details of provider: https://edirc.repec.org/data/ifkthse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.