Do Housing Prices Account for School Accountability? Working Paper

Since the passing of the No Child Left Behind Act of 2001, each state is required to publicly report school quality measures and student test performance. Many states, including North Carolina, were already reporting their own quality measure and since 2002 have included an additional quality measure to meet the newer federal requirements. There has been extensive research documenting the relationship between housing prices and test scores at local public schools. Given the research, one may presume additional information about school quality to also influence the housing market. This paper examines whether state reported school quality measures influence household sorting decisions, using a regression discontinuity approach and comprehensive data on real estate transactions over the period 2003-2007. The results suggest that even when taking into account student performance on test scores and other variables the market’s response to the release of information related to school quality provided by the state’s recognition system is significant. ∗I would like to thank the members of my committee Patrick Bayer, Jacob Vigdor, Charles Becker and Thomas Nechyba, as well as participants in the Duke Urban Environmental Lunch Group, for their helpful guidance, comments and suggestions. All errors and omissions are mine. Address: Box 90097 Department of Economics, Duke University, Durham,NC 27708. Email: [email protected]