London School of Economics Centre for the Economics of Education LSE
Centre for the Economics of Education  (CEE)

Abstract for:

Valuing School Quality Using Boundary Discontinuities

Stephen  Gibbons,  Stephen  Machin,  Olmo  Silva,  January 2012
Paper No' CEEDP0132: | Full paper (pdf)
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Keywords: House prices; school quality; boundary discontinuities

JEL Classification: C21; I20; H75; R21

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEE Discussion Papers
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Existing research shows that house prices respond to local school quality as measured by average test scores. However, higher test scores could signal better quality teaching and academic value-added, or higher ability, sought-after intakes. In our research, we show decisively that value-added drives households’ demand for good schooling. However, prior achievement – linked to the background of children in school – also matters. In order to identify these effects, we improve the boundary discontinuity regression methodology by matching identical properties across admissions authority boundaries; by allowing for boundary effects and spatial trends; by re-weighting our data towards transactions that are closest to district boundaries; by eliminating boundaries that coincide with major geographical features; and by submitting our estimates to a number of novel falsification tests. Our results survive this battery of experiments and show that a one-standard deviation change in either school average value-added or prior achievement raises prices by around 3%.