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Oxford Review of Economic Policy 2008 24(1):99-119; doi:10.1093/oxrep/grn008
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© The Authors 2008. Published by Oxford University Press. For permissions please e-mail: journals.permissions@oxfordjournals.org

This article appears in the following Oxford Review of Economic Policy issue: HOUSING MARKETS AND THE ECONOMY [View the issue table of contents]

Valuing school quality, better transport, and lower crime: evidence from house prices

Stephen Gibbons*
Stephen Machin**
* Department of Geography and Environment, Centre for the Economics of Education and Centre for Economic Performance, London School of Economics, e-mail: s.gibbons{at}lse.ac.uk
** Department of Economics, University College London, Centre for the Economics of Education and Centre for Economic Performance, London School of Economics, e-mail: s.machin{at}ucl.ac.uk


  Abstract

Housing prices within urban areas exhibit highly localized variation that cannot be explained solely by differences in the physical attributes of dwellings. We consider the role of local amenities and disamenities in generating price variation within urban areas, focusing on three highly policy-relevant urban issues–transport accessibility, school quality, and crime. Our survey of the recent empirical literature highlights what is known and what is not known on these issues, and considers the relevance and reliability of this evidence for policy design and evaluation. Although there are serious empirical challenges, we argue that research on housing values based on careful research designs can offer credible estimates of the social value of place-specific attributes and amenities.

Key Words: house prices • transport • school quality • crime

We would like to thank Brett Day, John Muellbauer, and participants in the Oxford Review of Economic Policy Housing Markets Seminar at Saïd Business School on 12 September 2007, for a number of helpful comments. We also thank Alejandra Castrodad-Rodriguez for creating the maps of Figure 1.

1 Though see Hilber and Mayer (2004) for a discussion of why even those without children might care about school quality.

2 For instance, if the estimated hedonic price function is m = ax + bx2, then the implicit price of x is p = a + 2bx, and regression of p on x recovers the coefficient 2b.

3 This fairly common-sense observation is sometimes referred to as Tobler's first law of geography after Waldo Tobler (1970).


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