Capitalising the Value of Free Schools

The Impact of Supply Characteristics and Uncertainty

Datos Bibliográficos

ID9716319
AutoresPaul C Cheshire (London School of Economics and Political Science), Paul Cheshire (0000-0002-0906-9536, London School of Economics and Political Science), Stephen Sheppard (0000-0002-9309-1049, Williams College), S C Sheppard (Williams College)
Año2004
Volumen114
Número499
PáginasF397-F424
Fecha de publicación2004-11-01
Peer ReviewedSí
Open AccessSí
TipoARTICLE
RevistaThe Economic Journal (JOURNAL)
Identificadores de la revistaISSN: 0013-0133 • E-ISSN: 1468-0297
EditorialOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2004.00252.x
OpenAlexW2119485383
IdiomaEN
Citas recibidas51
Referencias citadas14

There has been a growing literature in both the US (for example Haurin and Brasington 1996, and Black 1999) and the UK (for example Gibbons & Machin, 2003) that estimates the way in which school quality is capitalised into house prices. Cheshire and Sheppard 1995 and 1999 estimated hedonic models in which the quality of the secondary school to which a household was assigned was a significant variable which provided evidence that secondary school quality was being capitalised into the price of houses. In contrast Gibbons and Machin concluded that primary schools were more significant. Each of these analyses is predicated on the assumption that the value of local schools should be reflected in the value of houses. We argue here that this is rather too simple. We should expect variation in the capitalised price of a given school quality at either primary or secondary level according to the elasticity of supply of ‘school quality’ in the local market, the certainty with which that quality can be expected to be maintained over time and the suitability of the dwelling to accommodate children. These factors will vary systematically between and perhaps within cities. This paper explores the sources and the impact of such variations as well as the impact of model specification. The results provide new evidence on the complex and subtle ways in which housing markets capitalise the value of local public goods such as school quality and perhaps most importantly suggest that this is highly non-linear: houses in the catchment areas of only the best state schools command substantial premiums but such capitalised values can be very substantial indeed

Business · Certainty · Economics · Elasticity (physics · Microeconomics · Price elasticity of demand · Price elasticity of supply · Public good · Quality (philosophy · Value (mathematics · Computer Science · Financial Literacy, Pension, Retirement Analysis · Fiscal Policy and Economic Growth · Housing Market and Economics · Mathematics