Working Paper

Public Education and Intergenerational Housing Wealth Effects

Abstract: While rising house prices are known to benefit existing homeowners, we document a new channel through which house price shocks have intergenerational wealth effects. Using panel data from school zones within a large U.S. school district, we find that higher local house prices lead to improvements in local school quality, thereby increasing children's human capital and future incomes. We quantify this housing wealth channel using an overlapping generations model with neighborhood choice, spatial equilibrium, and endogenous school quality. We find that housing market shocks generate large intergenerational wealth effects that account for around one-third of total housing wealth effects.

Keywords: Intergenerational mobility; Intergenerational wealth effects; school quality; Neighborhood choice; House prices;

JEL Classification: R23; E24; J62; I24; E21; R21;

https://doi.org/10.21034/iwp.100

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Opportunity and Inclusive Growth Institute Working Papers

Publication Date: 2024-10-11

Number: 100