Economics Seminar - Too Late to Buy a Home? School Redistricting and the Timing and Extent of Capitalization

In the past €‰fifty years, a voluminous literature estimating the value of schools through capitalization in home prices has emerged. Prior research has identi€fied capitalization using a variety of approaches including discontinuities caused by boundaries. Here, we use changes in school boundaries and the opening of a new school in Faye‹tte County (Lexington), Kentucky to identify this capitalization. Critical to properly estimating the effect of redistricting is to account for when information on the redistricting is available. We treat the information about the effects of zoning as occurring in three stages: announcement of the intent to open the new high school and redistricting, approval of the specifi€c redistricting plan (map) and implementation (opening of the new high school and actual changes in boundaries). We €find signi€ficant changes in values for homes redistricted from lower-performing schools and we fi€nd that this capitalization occurs well before implementation of the redistricting. As we show, failure to account for capitalization occurring before implementation will att‹enuate and even change the sign of capitalization.