Panel Paper: Does the Market Value Value-Added? Evidence From Housing Prices After Public Release of Teacher Value-Added

Friday, November 9, 2012 : 9:00 AM
International C (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Scott Imberman, Michigan State University and Michael Lovenheim, Cornell University

The push to expand test-based accountability in US K-12 education has led to a sizable increase in the amount of information administrators, parents and teachers have about the effectiveness of specific schools and teachers. In particular there has recently been a focus on providing results of teacher and school “value-added” assessments to the public.  Unlike standard data releases such as test scores and report cards, value-added advocates argue that these establish the causal effect of teachers and schools on achievement. Already a number of school districts such as New York, Los Angeles and Houston, have released some of this information either voluntarily or by court order.  While there is ample evidence from previous work that housing prices are responsive to test score level differences across schools, economists have yet to establish whether value-added methodology provides information that parents, and the community at large, value.   This paper is the first to provide such valuations.  We use a unique and unexpected release of school value-added to identify this impact.  In August of 2010 the Los Angeles Times newspaper released percentile rankings from a value-added analysis of the Los Angeles Unified School District conducted by the RAND Corporation.  This provides a specific point-in-time where the public learned of their local-school’s value added.  Since some schools received unexpectedly high and low scores relative to existing school quality measures, we are able to treat this as an information shock that allows estimation of the impact on house sale prices through difference-in-differences and, using data on all of Los Angeles County including school districts that were not subject to the value-added release, triple-differences identification strategies.  Preliminary results suggest that housing prices did increase but with a lag of around three quarters.  Ultimately it appears that a 50 percentile rank increase in value-added (e.g. going from a 10th to 60th percentile school) generated a 1.5% to 4% increase in sale prices.