It is now widely understood that the quality of state schools in a neighbourhood has an impact on local house prices. Analysing data for Paris, Gabrielle Fack and Julien Grenet have looked deeper into this link by exploring how the presence of private schools influences parents' willingness to pay to live near good state schools.School catchment areas, France, private education, public education, housing, house prices

Gabrielle Fack

Julien Grenet

English

Research Papers in Economics

CentrePiece Autumn 2011
14
House prices and school quality:
evidence from state and 
private education in Paris
How much are parents willing to pay to get their children
into what they perceive to be a better school? The answer
to this question has important implications both in terms
of school admission policies and urban planning.
Residence-based school admission rules often aim at
ensuring a degree of social diversity in schools. But a
higher willingness to pay for better schools implies that
residential choices are more heavily influenced by the
perceived quality of local schools. Contrary to the original
objective, this phenomenon will tend to reinforce the level
of social segregation between schools and undermine the
effectiveness of school catchment areas as a policy tool to
reduce educational inequalities.
If parents care about the quality of education and if
children are assigned to schools based on their place of
residence, then differences in school performance should
be at least partly captured in house prices. The housing
market therefore provides an indirect way of measuring
the average willingness to pay for better schools.
Following this intuition and analysing data from the UK
and the United States, empirical studies (including work by
CEP’s Steve Gibbons and Stephen Machin) have found
that there is often a significant house price premium
attached to an increase in the average test scores of 
local schools.
A limitation of these studies is that they restrict the
analysis to state schools, ignoring the influence that
private schools might have on residential choices. Since
admission to private schools is not usually subject to a
residence requirement, private education provides an
outside option for parents who are not satisfied with the
quality of the neighbouring state schools. It seems likely
that the willingness of parents to pay for better state
schools in a particular neighbourhood is smaller when the
number of local private schools is higher.
Our study explores this issue by evaluating how house prices
react to the quality of education offered by local schools,
both state and private. We analyse comprehensive data on
middle schools (those for pupils aged 11 to 14) and housing
market transactions in Paris over the period 1997-2004. 
The organisation of secondary schooling in Paris is a useful
context for analysing how the interaction between state
and private schools influences residential choices because
it combines a residence-based system of assignment to
state schools with a well-developed and almost entirely
publicly funded network of private schools.
Parents who reside in a given neighbourhood have hardly
any control over the choice of their child's state school
because each catchment area contains only one school
and because very few dispensations are granted to
applicants who live outside the catchment area. In this
context, parents who want to avoid sending their children
to a low-performing local state school can either move to
another area or seek admission to a private school.
What makes the latter option attractive is that in addition
to being entitled to select their pupils from anywhere in
the city, private schools usually charge relatively modest
fees (between £1,000 and £2,000 a year). As a result,
private schooling accounts for about a third of total
secondary education enrolment in Paris.
Empirically, the issue of estimating the impact of state
school performance on house prices is a challenge for
researchers. As in most big cities, the best state schools in
Paris tend to be located in the most expensive areas. This
feature, however, does not necessarily imply that houses
are more expensive because local schools are better.
In fact, the causality might go the other way round.
Wealthy neighbourhoods attract households of high socio-
economic status whose children tend to perform better at
school than those in more deprived areas. This simple
mechanism induces a positive correlation between
apparent school quality and house prices, even if parents
do not take account of the performance of local schools
when deciding to move into a neighbourhood.
Our research addresses the causality challenge by
It is now widely understood that the quality of state schools in a
neighbourhood has an impact on local house prices.Analysing data
for Paris, Gabrielle Fack and Julien Grenet have looked deeper into
this link by exploring how the presence of private schools influences
parents’ willingness to pay to live near good state schools.
in brief...15
comparing the value of house sales across middle school
catchment area boundaries – that is, sales of houses
located close to each other but assigned to different state
schools.
The key justification for this approach is that on average,
flats located in the immediate vicinity of school
attendance boundaries have similar attributes (period of
construction, number of rooms, etc.) and, by definition,
belong to the same neighbourhood. The only significant
difference between them is that they are assigned to
different state schools. Hence differences in cross-
boundary house prices can be interpreted as a direct
measure of the unequal valuation of the corresponding
state schools. 
Based on this empirical strategy, we find that the
perceived quality of state middle schools has a significant
impact on the house prices. Using various measures of
school performance, we find that differences in school
quality translate into differences in house prices of a
similar magnitude to those found in the UK and the
United States. Our analysis suggests that roughly 5% of
local variations in house prices in Paris are explained by
differences in the perceived quality of state schools. 
We also show that the impact of state middle schools on
the housing market varies with the local density of private
middle schools. The effect of school quality is more
pronounced for residences in areas with a low density of
private schools and is non-existent for areas with the
highest density of private schools. Our results suggest that
in areas where private schools are scarce, the capitalisation
of state school performance in housing prices is in the
same order of magnitude as the individual cost of a
private school four-year tuition fee in areas where they are
numerous, that is about €4,000 at the average flat price.
These findings are consistent with the idea that by
offering a relatively cheap outside option to parents who
are willing to avoid the constraints of strict catchment
areas, private schools tend to mitigate the impact of state
school performance on house prices.
In terms of policy implications, our results suggest 
that the co-existence of state and private schools is an
important dimension to take into account when designing
school admission policies. In particular, the effect of
alternative state school admission rules (strict residence-
based assignment, relaxed school zoning, open enrolment,
etc.) on residential and school segregation, pupil
performance and educational inequalities depends
crucially on how the housing market incorporates state
and private school performance.
This article summarises ‘When do Better Schools
Raise Housing Prices? Evidence from Paris
Public and Private Schools’ by Gabrielle Fack
and Julien Grenet, Centre for the Economics of
Education Discussion Paper No. 119
(http://cee.lse.ac.uk/cee%20dps/
ceedp119.pdf).
Gabrielle Fack is at Universitat Pompeu Fabra
in Barcelona. Julien Grenet of the Paris School
of Economics is a research associate in CEP’s
education and skills programme.
As elsewhere, Parisian
house prices are
influenced by the
perceived quality of
local state schools

In brief... House Prices and School Quality: Evidence from State and Private Education in Paris

http://cep.lse.ac.uk/pubs/download/cp350.pdf

In brief... House Prices and School Quality: Evidence from State and Private Education in Paris

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