Restricting School-choosing And The Capitalization Of Compulsory Education

According to the Compulsory Education Law in China,local governments and schools should stick to the Nearby Enrolment Policy in nine-year compulsory education.As a result,big cities in China all draw out school districts boundaries,and the ownership of a school-district house by students' family has become one of the admission requirements for primary and secondary school students.Also,in recent years,the Ministry of Education has restricted parents' school-choosing behavior concerning paying additional fees and the enrolment of students with special talents by schools,in an effort to ensure the equity in education.All these policies made purchasing a house in a certain school district the main way of accessing educational resources.At the same time,due to the uneven spacial distribution of educational resources and the shortage in its supply,there has been a increasingly fierce competition among parents in big cities for high-quality educational resources,resulting in the growing of housing price.Compared to the non-school-district houses and the houses of less popular schools,the housing price of high-quality schools has experienced higher growth,which demonstrated the capitalization of education.Based on the above background,this research focused on the prices of the second-hand school-district houses in four districts within Nanjing City,and applied the Hedonic Price Model(HPM)and the Difference-in-Differences(DID)approach to analyze the housing price premium for school-district houses.Following existing research,this paper studied the relationship between school quality and the housing price of school-district houses by estimating the hedonic price model.Then,analyzed the influence of the 2014 Nearby Enrolment Policy upon the housing price of high-quality and non-high-quality primary schools by applying the DID method.The reason of applying the DID method is that in January,2014,the Chinese Ministry of Education introduced A Notice of the Ministry of Education concerning Further Enforcement of the Nearby Enrolment Policy without Examination in the Targeted Big Cities,and Nanjing was listed as one of the 19 cities.This policy aimed at getting the majority of the students into nearby schools without taking examination during the nine-year compulsory education and restricting school-choosing.Though exogenous to the school-district housing market,this policy would shed an influence on the housing price of high-quality schools by increasing residents' demands for such houses and thus raising housing price.Because it has made purchasing a house in a certain school district almost the only way of choosing a school.Viewing the introduction of the Nearby Enrolment Policy as an quasi-natural experiment,this paper employed DID method to estimate the influence of this policy on the housing prices of high-quality and non-high-quality schools.And the Hedonic regression showed that the quality of primary schools in Nanjing does have a premium on the school-district housing price,which differs with the ranking of the schools.And compared to ordinary primary schools,the “provincialkey” and “municipal key” schools bring about 8.8% and 8.0% premium on the school-district housing price respectively.And the DID estimation showed that the policy-led premium of housing price for houses with high-quality schools is approximately 5.9%,compared to the ordinary schools,and this result is robust.The above empirical results verified the capitalization of education and revealed residents' preference for high-quality education.This paper adds to the existing research with new perspective and micro-level data in investigating the capitalization of public goods.Empirically,it uses DID method to estimate the influence of an educational policy upon housing price in school districts,and by differencing data,the DID model is able to deal with omitted variables bias in classic hedonic price model and results in more accurate estimation.Meanwhile,concerning the data used,this paper collected detailed data of school-district house transaction to form a set of repeated cross-sectional data to support its research.This data set outperforms that of the researches using average housing price of a community because it is more informative,thus can produce more accurate results.In the end,the policy implication of this paper is to introduce education-equalizing policies to prompt the distribution of educational resources and prevent the housing price of school-district houses from growing.