Measuring the Efficacy and Efficiency of School Facility Expenditures

The paper presented in this ZEW Research Seminar offers new evidence on the effects and efficiency of school facility investment on student and neighborhood outcomes, linking data on new facility openings to administrative student and real estate records in Los Angeles Unified School District (LAUSD). Since 1997, LAUSD has built and renovated hundreds of schools as a part of the largest public school construction program in US history. Using an event study design that exploits quasi-random variation in the timing of new facilities and a residential assignment instrument, the authors find strong positive impacts on math, English, and attendance. Effects are not driven by changes in class size, peers, teachers, or principals, but rather by increased facility quality and, to a lesser extent, reductions in overcrowding. House prices increase by 6% in neighborhoods that receive new schools. Using a residential choice model, the paper presented in this ZEW Research Seminar then estimates that a dollar spent on school facilities raises the sum of housing values and adult earnings by 1.64 dollars, with only 22% of this valuation due to academic benefits of the program. The housing market valuation of academic benefits captures most but not all of the implied future earnings gains.