School Quality, Neighborhoods, and Household Residential Decisions

Author: Keren Horn

Dissertation School: New York University

Abstract:

Existing research has shown that households consider differences in public school quality when choosing where to live (Jud and Bennett, 1986). A recent article in the New York Times entitled "Parent's Real Estate Strategy: Schools Come First" (July 12, 2010) finds that in New York City homeowners often hire an education consultant before deciding in which neighborhood they would be willing to purchase a home. However, current literature does not explain exactly how and to what extent a household's decision to move into a neighborhood is affected by school quality. Nor does existing research detail how changes in school quality influence that household's strategy for investing in renovating their home. Due to difficulties in the identification of the relationship between schools and homeowners, as well as the difficulties involved in obtaining the necessary data, these questions have remained unanswered.

This dissertation will focus on the relationship between residential choices and local public elementary schools in three cities: New York, Los Angeles, and Houston. I begin by exploring how school quality affects residential location decisions. Are in-movers into neighborhoods with high performing schools more likely to have higher incomes, have children, or be homebuyers than in-movers into similar neighborhoods with lower performing schools? I then focus on the relationship between schools and neighborhood investments. Are homeowners more willing to spend money on renovations as school quality improves? Finally, I will explore whether these decisions differ in neighborhoods of high minority concentration and by the race of the household.

The primary concern with identifying how school quality influences household residential decisions is omitted variable bias. There are many aspects of a neighborhood that matter for choosing where to live, not all of which can be observed. To isolate the influence of school quality, I employ a boundary discontinuity design, following Black (1999). I also build on the existing methodology by relying on a longitudinal dataset between the years 2000 and 2008. Adding the dimension of time to the boundary discontinuity approach will allow me to observe how changes in school quality cause changes in household decisions. Furthermore, I include three cities (New York, Los Angeles, and Houston) in the analysis that have each experienced a shift in school policy. Relying on these exogenous changes which create shocks to information on school quality enables a more clear identification of the relationship between household decisions and public school quality.

This dissertation contributes to existing knowledge through the creation of a unique dataset. To obtain data on in-movers, I will use the restricted version of the 2000 Decennial Census and the 2002-2008 American Community Survey (ACS). For each of the cities in my sample, I also have data on elementary school attendance zones, test scores and housing investments. By combining these datasets, I create a neighborhood panel of data for each of these three cities between 2000 and 2008.

This research will help inform policies surrounding households and neighborhood quality. Understanding how school quality influences a household's choice of neighborhood and decision to invest can help the U.S. Department of Housing and Urban Development along with other federal, state and local institutions, design more effective housing and related policies.

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