Over the years 2000 to 2013, the Los Angeles real estate market featured a boom, a bust, and then another boom. This study uses this variation to test how the valuation of school quality varies over the business cycle.
The study finds that the capitalization of school quality is counter-cyclical. While good schools always command a price premium, this premium grows during the bust. Possible mechanisms for these findings include consumers "trading down" from private to public schools during contractions as well as the effects of reduced household mobility during downturns in raising the value of the public school option.