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Are all Homeowners Willing to Pay for Better Schools? ─ Evidence from a Finite Mixture Model Approach

  • Jee W. Hwang
  • Chun Kuang
  • Okmyung BinEmail author
Article
  • 213 Downloads

Abstract

School quality indicators such as student test scores have been shown to be capitalized into the value of local homes. The presence of households with different preferences for education implies that the implicit price of improvements in school quality might vary even within a region. In this paper, we employ a finite mixture model (FMM) to capture unobserved heterogeneity in household preferences. Using school quality and residential property sales data from Pitt County, North Carolina, we find evidence of two subpopulations of houses, where the prices for one group are virtually invariant to school quality. Consistent with recent research by Davis et al. (2017) these results indicate that heterogeneous valuation of educational quality by households with different socio-economic backgrounds should be taken into consideration when devising policies targeted at the local level.

Keywords

Home price premium Heterogeneity Finite mixture model School quality 

JEL Classification

D12 I25 L10 R21 

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.College of Business Administration, Northern New Mexico CollegeEspañolaUSA
  2. 2.Department of EconomicsEast Carolina UniversityGreenvilleUSA

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