On Buyer Ethnicity and School Quality Capitalization

Does buyer ethnicity or cultural background affect what they pay to live in neighborhoods served by higher quality public schools? Utilizing innovative methodologies that infer individuals' ethnicity from their names, this research explores how cultural background influences purchasing decisions in areas served by higher quality public schools. Our findings reveal that while ethnic buyers generally pay less for access to better educational facilities, this trend dissipates when controlling for house and neighborhood selection effects, underscoring the subtle role of ethnicity in real estate dynamics. The matched sample analysis, a robustness check, indicates that the apparent price differences across narrow ethnic categories primarily stem from selection biases rather than direct ethnic preferences. These insights not only challenge traditional assumptions about market behavior but also open new avenues for understanding the complex layers of buyer decision-making in diverse markets.