How Much Do Public Schools Really Cost? Estimating the Relationship between House Prices and School Quality

Australian National University Centre for Economic Policy Research Discussion Paper No. 588

30 Pages Posted: 9 Sep 2007

See all articles by Ian Davidoff

Ian Davidoff

International Monetary Fund (IMF)

Andrew Leigh

Australian House of Representatives Parliament House

Date Written: July 2007

Abstract

This paper investigates the relationship between housing prices and the quality of public schools in the Australian Capital Territory. To disentangle the effects of schools and other neighbourhood characteristics on the value of residential properties, we compare sale prices of homes on either side of high school attendance boundaries. We find that a 5 percent increase in test scores (approximately one standard deviation) is associated with a 3.5 percent increase in house prices. Our result is in line with private school tuition costs, and accords with prior research from Britain and the United States. Estimating the effect of school quality on house prices provides a possible measure of the extent to which parents value better educational outcomes.

Keywords: housing demand, school quality

JEL Classification: I22, R21

Suggested Citation

Davidoff, Ian and Leigh, Andrew, How Much Do Public Schools Really Cost? Estimating the Relationship between House Prices and School Quality (July 2007). Australian National University Centre for Economic Policy Research Discussion Paper No. 588, Available at SSRN: https://ssrn.com/abstract=1011516 or http://dx.doi.org/10.2139/ssrn.1011516

Ian Davidoff (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Andrew Leigh

Australian House of Representatives Parliament House

Canberra, 2600
Australia

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