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Valuing school quality using boundary discontinuities

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A large body of international research shows that house prices respond to local school quality as measured by average test scores. But better test scores could signal better expected academic outputs or simply reflect higher ability intakes, and existing studies rarely differentiate between these two channels. In our research, we simultaneously estimate the response of prices to school ‘value-added’ and school composition to show more clearly what drives parental demand for schools. To achieve consistent estimates, we push to the limit the use of geographical boundary discontinuities in hedonic models by matching identical properties across admissions authority boundaries; by allowing for a variety of boundary effects and spatial trends; by re-weighting our data to only consider the transactions that are closest to education district boundaries; and by submitting the estimates to a number of potentially destructive falsification tests. Our results survive this battery of experiments and show that a one-standard deviation change in either school value-added or prior achievement raises prices by around 3%.

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