Abstract
Neighbourhood effects are often asserted to be attributable to differences in school zones. However, few studies explore the confounding interactions between the quality of school zones and those of neighbourhoods. This study examines whether the effects of school quality interact with neighbourhood effects in determining house price premia. Using micro-level student data from the New Zealand Ministry of Education, we operationalise school quality as the variation in university entrance rates over the years. We then exploit the overlapping geographically defined school zones and a unique socioeconomically based funding system in New Zealand to decompose the total effect of neighbourhoods and school qualities. Our results from the hedonic pricing, boundary-discontinuity, and repeat-sales model indicate that school quality, school decile, and school options are complement to each other that leads homebuyers to have a higher willingness to pay. We also discuss the planning implications on school segregation.
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