A unified framework for measuring preferences for schools and neighborhoods
Abstract
This paper develops a framework for estimating household preferences for school and
neighborhood attributes in the presence of sorting. It embeds a boundary discontinuity
design in a heterogeneous residential choice model, addressing the endogeneity of
school and neighborhood characteristics. The model is estimated using restricted-access
Census data from a large metropolitan area, yielding a number of new results. First,
households are willing to pay less than 1 percent more in house prices - substantially
lower than previous estimates - when the average performance of the local school increases
by 5 percent. Second, much of the apparent willingness to pay for more educated and
wealthier neighbors is explained by the correlation of these sociodemographic measures
with unobserved neighborhood quality. Third, neighborhood race is not capitalized
directly into housing prices; instead, the negative correlation of neighborhood percent
black and housing prices is due entirely to the fact that blacks live in unobservably
lower-quality neighborhoods. Finally, there is considerable heterogeneity in preferences
for schools and neighbors, with households preferring to self-segregate on the basis
of both race and education. © 2007 by The University of Chicago. All rights reserved.
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https://hdl.handle.net/10161/2014Published Version (Please cite this version)
10.1086/522381Publication Info
Bayer, P; Ferreira, F; & McMillan, R (2007). A unified framework for measuring preferences for schools and neighborhoods. Journal of Political Economy, 115(4). pp. 588-638. 10.1086/522381. Retrieved from https://hdl.handle.net/10161/2014.This is constructed from limited available data and may be imprecise. To cite this
article, please review & use the official citation provided by the journal.
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Show full item recordScholars@Duke
Patrick Bayer
Gilhuly Family Distinguished Professor in Economics
Bayer's research focuses on wide range of subjects including racial inequality and
segregation, social interactions, housing markets, education, and criminal justice.
His most recent work has been published in the Quarterly Journal of Economics, American
Economic Review, Econometrica, and the Review of Financial Studies. He is currently
working on projects that examine jury representation and its consequences, the intergenerational
consequences of residential and school segregation, neighborhood

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