Hedonic analysis and time-varying capitalization: An application using school quality

This paper investigates the dynamics of school quality capitalization during the boom-bust cycle of the housing market. We find that the housing downturn led to a sharp increase in capitalization for high-quality schools, whereas the boom and recovery periods saw a decline in valuation for top schools. Hence, the capitalization of school quality exhibits a strong countercyclical trend with the overall housing market. We test whether our findings are driven by households trading down from private schools during downturns or the fact that the housing supply responds asymmetrically during the boom and bust, but we find little support for these propositions.