Promise Scholarship Programs as Place-Making Policy: Evidence from School Enrollment and Housing Price

 Following the example of the Kalamazoo Promise initiated in 2005, place-based "Promise'' scholarship programs have proliferated over the past 8 years.  These programs guarantee money towards the costs of attendance at selected colleges and universities provided that a student has resided and attended school within a particular public school district continuously for at least the four years prior to graduation.   

While some early programs have been studied in isolation, the impact of such programs in general is not well understood.  In addition, although there is substantial and controversial variation from the original program's design, there is no direct evidence on how outcomes vary along with these design choices.   

This study uses a difference-in-difference approach to compare the evolution of both school enrollments and residential real estate prices around the announcement of these programs within the affected Promise zone and in the surrounding area.  Taken together, these estimates suggest that these scholarships have important distributional effects that bear further examination.  In particular, while estimates indicate that public school enrollments increase in Promise zones relative to their surrounding areas following Promise announcements, schools associated with merit-based programs experience increases in white enrollment and decreases in non-white enrollment.  

Furthermore, housing price effects are larger in neighborhoods with high quality schools and in the upper half of the housing price distribution, suggesting higher valuation by high-income households.  These patterns lead to the conclusion that such scholarships are primarily affecting the behavior of households living above the median income for whom they present the greatest value and that merit-based versions disproportionately impact white households.