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Paying for Primary Schools: Admission Constraints, School Popularity or Congestion?* 


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    We thank seminar and conference participants in Bergen, Bristol, the Centre for Economic Performance and the 2005 RES Conference for helpful comments. We also thank the Nationwide Building Society for providing the house-price data and Joan Wilson for excellent research assistance.


School quality is capitalised in house prices if access to schools is rationed by residential location. We generate empirical predictions from three different theoretical approaches linking house prices to school performance, distance to school and capacity. These are respectively based upon admission constraints, school popularity and congestion effects. We find that test-score-based school performance significantly increases property prices, but only the best one in ten schools generate higher than average prices close by, and that prices are higher close to popular, over-capacity schools. We conclude that the empirical evidence is more in line with the school popularity model.