Educational Outcomes and House Values: A Test of the value added Approach

We use house price hedonics to compare the extent that homeowners value traditional measures of school quality or the "value added" of schooling. Unlike other studies, we use spatial statistics as an identification strategy. Based on our study of 310 school districts and 77,000 house transactions, we find little support for the value added model. Instead, we find that households consistently value a district's average proficiency test scores and expenditures. The elasticity of house prices with respect to school expenditures is 0.49, and an increase in test scores by one standard deviation, ceteris paribus, raises house prices by 7.1 percent. Copyright Blackwell Publishers, 2006