Pricing Peers in Stockholm: The Effect of School Grades on House Prices

Sammanfattning: The link between school grades and house prices has not been studied in Sweden. Research is further warranted by the institutional setting of the capital municipality, Stockholm: school districts and the parallel rise of free, choice-elected, private schools. Using all detached house transactions (N=33,060) between 2001--2013, a hedonic model shows a strong positive correlation between lagged average city district final grades and house price premium using fine grained locality controls. Further specifications more open to a causal interpretation draws upon the distance to the best school, interacted with a school district endowment effect, shows the effect of grades upon prices is still clear. The estimates show that the effect distance to high grade schools itself is insignificant -- however at a mean school district size, the value added of the school also belonging to the district is positive and increasing for grades over 235 for a maximum house premium of 7.8 percent.