Public Education and Intergenerational Housing Wealth Effects
While rising house prices benefit existing homeowners, we document a new channel through which price shocks have intergenerational wealth effects. Using panel data from school zones within a large U.S. school district, we find that higher local house prices lead to improvements in local school quality, thereby increasing child human capital and future incomes. We quantify this housing wealth channel using an overlapping generations model with neighborhood choice, spatial equilibrium, and endogenous school quality. Housing market shocks in the model generate large intra- and intergenerational wealth effects, with the latter accounting for over half of total wealth effects.
For many helpful suggestions we thank Victoria Gregory, Matthijs Korevaar, Julian Kozlowski, Oksana Leukhina, Suresh Naidu, B. Ravikumar, Hannah Rubinton, Thomas Sargent, and Aarti Singh. We also thank seminar participants at the Barcelona School of Economics Summer Forum, the North American Meeting of the Urban Economics Association, the New Zealand Association of Economists meetings, the Virtual Australian Macroeconomics Seminar Workshop, the Federal Reserve of St. Louis, the Society for Nonlinear Dynamics Symposium for Young Researchers, the Mid-West Macroeconomics Conference, the Canadian Labour Economic Forum, the Western Economics Association International conference, the University of Houston, Texas A&M University, Melbourne University, Australian National Unviersity, and the University of Queensland. Angela Zheng thanks the Social Sciences and Humanities Research Council of Canada for funding this project through an Insight Development Grant (Grant #: 430-2021-00029). Data provided by Zillow through the Zillow Transaction and Assessment Dataset (ZTRAX). More information on accessing the data can be found at http://www.zillow.com/ztrax. The results and opinions are those of the authors and do not reflect the position of Zillow Group. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.