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.
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