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School quality and housing prices: Empirical evidence from a natural experiment in Shanghai, China

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  • Feng, Hao
  • Lu, Ming

Abstract

The endogeneity of education quality and quantity accounts for difficulties in appropriately identifying the causal relationship between education and housing prices. To determine how education quality is capitalized into housing prices, we deal with endogeneity bias by employing a natural experiment occasioned by China’s education reforms. Based on monthly panel data for 52 residential areas in Shanghai, we conducted a natural experiment based on the exogenous designation of specific high-quality schools as Experimental Model Senior High Schools (EMSHS). Our natural experiment proved useful in analyzing how new information affected housing prices in China’s developing housing market. We found evidence that housing prices included allowances for these new EMSHS designations. In general, the presence of an additional EMSHS (of the best quality) per square kilometer increases housing prices by 17.1%. If one additional, previously non-designated high school is designated as EMSHS in a residential area, housing prices will be 6.9% higher.

Suggested Citation

  • Feng, Hao & Lu, Ming, 2013. "School quality and housing prices: Empirical evidence from a natural experiment in Shanghai, China," Journal of Housing Economics, Elsevier, vol. 22(4), pages 291-307.
    • Handle: RePEc:eee:jhouse:v:22:y:2013:i:4:p:291-307
    DOI: 10.1016/j.jhe.2013.10.003
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    More about this item

    Keywords

    Education; Housing market; Capitalization; Public goods; Natural experiment;
    All these keywords.

    JEL classification:

    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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