The Effect of Housing Wealth on College Choice: Evidence from the Housing Boom
The higher education system in the United States is characterized by a large degree of quality heterogeneity, and there is a growing literature suggesting students attending higher quality universities have better educational and labor market outcomes. In this paper, we use NLSY97 data combined with the difference in the timing and strength of the housing boom across cities to examine how short-run home price growth affects the quality of postsecondary schools chosen by students. Our findings indicate a $10,000 increase in a family's housing wealth in the four years prior to a student becoming of college-age increases the likelihood she attends a flagship public university relative to a non-flagship public university by 2.0 percent and decreases the relative probability of attending a community college by 1.6 percent. These effects are driven by relatively lower and middle-income families. We show that these changes are due to the effect of housing wealth on where students apply, not on whether they are admitted. We also find that short-run increases in home prices lead to increases in direct quality measures of the institutions students attend. Finally, for the lower-income sample, we find home price increases reduce student labor supply and that each $10,000 increase in home prices is associated with a 1.8% increase in the likelihood of completing college.
We wish to thank John Bound, Charlie Clotfelter and Caroline Hoxby for helpful comments on this paper as well as seminar participants at Cornell University, MIT, the University of Texas - Dallas, the University of Akron, the National Bureau of Economic Research Household Finance Meeting, and the American Education Finance Association Annual Meeting. We are additionally grateful to Jen Doleac for excellent research assistance. We thank the Stanford Institute for Economic Policy Research (SIEPR) and the Pew Charitable Trust Economic Mobility Project for financial support; all errors, omissions and conclusions are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Michael F. Lovenheim & C. Lockwood Reynolds, 2013. "The Effect of Housing Wealth on College Choice: Evidence from the Housing Boom," Journal of Human Resources, University of Wisconsin Press, vol. 48(1), pages 1-35. citation courtesy of