The effect of school capital investments on local housing markets and household sorting in California

Jinsub Choi

Applied Economics, 2019, vol. 51, issue 18, 1989-2000

Abstract: In this paper, I investigate what effect school capital investments have on housing values and household location choice in the context of the Tiebout model. This research identifies an exogenous variation in school capital investments by exploiting the lottery allocation of entitlement to an interest-free construction bond among districts in California. Although the lottery is exogenous, additional non-lottery allocation complicates identification. This paper develops an empirical model based on sample selection methods in order to create a counterfactual state in which additional non-lottery allocation would not have existed. I find that receiving the interest-free construction bond increases school capital expenditure and housing values at the district level. I view the increase in housing values as the capitalization of school capital investments. I find little evidence for the effect of the interest-free construction bond on household sorting and student’s academic outcomes.

Date: 2019
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DOI: 10.1080/00036846.2018.1537475

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