Working Paper: NBER ID: w31345
Authors: Michael Gilraine; James Graham; Angela Zheng
Abstract: 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.
Keywords: Public Education; Housing Wealth; Intergenerational Effects; School Quality
JEL Codes: E21; E24; I24; J62; R21; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher local house prices (R21) | Improvements in local school quality (I21) |
| House price growth (R31) | Shift in composition of residents towards higher socioeconomic status (R23) |
| Shift in composition of residents towards higher socioeconomic status (R23) | Improvements in local school quality (I21) |
| Improvements in local school quality (I21) | Significant increase in present value of children's future incomes (J17) |
| House price growth (R31) | Improved school quality (I21) |
| Housing market shocks (R31) | Intra and intergenerational wealth effects (D15) |