School Quality and Property Values: Re-examining the Boundary Approach

This paper examines the hypothesis that the strong reduction in the effect of school quality on housing prices from the inclusion of boundary fixed affects can be attributed to uncertainty associated with school assignment near attendance zone boundaries, rather than unobserved neighborhood attributes. We examine this hypothesis using repeated cross-sections of housing transactions near school district boundaries in Connecticut since these boundaries are primarily town boundaries and for the most part have not changed in many decades. However, once we control for the across boundary neighborhood quality differences that are likely to arise over time with permanent boundaries, we find fairly small effects of test scores on property values; findings that are very similar to the findings of traditional studies based on attendance zone boundaries.