Does the Market Value Value-Added? Evidence from Housing Prices
After a Public Release of School and Teacher Value-Added
by Scott A. Imberman, Michael F. Lovenheim – #19157 (ED PE)
Value-added data are an increasingly common evaluation tool for schools and teachers. Many school districts have adopted these methods and released the results publicly. In this paper, we study the release of value-added data in Los Angeles by the Los Angeles Times newspaper to identify how measured value-added is capitalized into housing prices. This analysis is the first in the school valuation literature to examine property value responses to a value-added information shock, which is of interest as this measure is less correlated with demographics than typical school quality measures. Unique to this setting as well is the release of both school and teacher-level value-added data, which allows us to examine how property values respond to both types of information. Using a difference-in-differences methodology surrounding the release, we find that neither school nor teacher value-added scores are capitalized into home prices. Our results suggest that, despite the contentiousness following these data releases, homeowners do not consider value-added models as currently constructed to be a relevant school quality measure on the margin.
A bit like hospital ratings which people tend to put fairly far down the list of considerations when choosing a hospital.
This result could arise if parents care mainly about the characteristics of the peers their children will have rather than about the school impact per se. So they rate schools with high acheivement better, but don’t care whether this comes from the ‘value added’ of the school, or the qualities of the children in the school.
This type of parental decision is a zero-sum game – not everyone can send their children to schools containing the top 20% of students. So even if parents feel this way, it does not mean that public policy should not care about school value-added.
Someone should tell all of the real-estate agents near where I live — I’m near one of the elite and zoned public high-schools, and it seems to be one of their major selling points (although perhaps there are differences between decent and elite).
Also, Andrew Leigh and Harry Clark don’t believe this for Australia, and Andrew Leigh collected the data in Canberra (I’ll bet the effect will be bigger in Melbourne and Sydney, as the difference in schools is much more). See: http://kalimna.blogspot.fr/2008/06/andrew-leigh-on-house-prices-value-of.html