The Effect of Housing Wealth on College Choice: Evidence from the Housing Boom

Abstract

The higher education system in the United States is characterized by a large degree of quality heterogeneity, and there is a growing literature suggesting students attending higher quality universities have better educational and labor market outcomes. In this paper, we use NLSY97 data combined with the difference in the timing and strength of the housing boom across cities to examine how short-run home price growth affects the quality of postsecondary schools chosen by students. Our findings indicate a $10,000 increase in a family's housing wealth in the four years prior to a student becoming of college-age increases the likelihood she attends a flagship public university relative to a non-flagship public university by 2.0 percent and decreases the relative probability of attending a community college by 1.6 percent. These effects are driven by relatively lower and middle-income families. We show that these changes are due to the effect of housing wealth on where students apply, not on whether they are admitted. We also find that short-run increases in home prices lead to increases in direct quality measures of the institutions students attend. Finally, for the lower-income sample, we find home price increases reduce student labor supply and that each $10,000 increase in home prices is associated with a 1.8% increase in the likelihood of completing college.

Parental Job Loss and Children's Long-Term Outcomes: Evidence from 7 Million Fathers' Layoffs

“…The discrepancy could also arise from unobserved local determinants of enrollment that correlate with home price shocks such as local labor market conditions. However, Lovenheim and Reynolds (2013) show that any unobservables driving their results would have to affect owners but not renters, and operate conditional on children's cognitive test scores. 10 Manoli and Turner (2014) find effects that are about 40 times larger per dollar of parental income, but not statistically different on more narrow bandwidths, than those I obtain here.…”

“…Atkin (2009) uses age at event variation in factory openings, but power limitations appear to prevent him from running the kinds of nonparametric placebo tests I run here; he finds effects of maternal employment on child height that are far too large to be explained by maternal earnings. Lovenheim (2011) and Lovenheim and Reynolds (2013) find that a home equity gain of $10,000 over four years prior to college entry increases enrollment by 0.7 percentage points, and by over 5 percentage points for lower income families. Again, this estimate would suggest that most of the cross-sectional correlation between late childhood parental income and college enrollment is causal.…”

“…Most earlier papers do not identify a clear source of exogenous variation in parental income and tend to estimate small effects (e.g., Cameron and Heckman 2001;Carneiro and Heckman 2002;Shea 2000;Keane and Wolpin 2001;Cameron and Taber 2004;Brown, Scholz, and Seshadri 2012), with some possible increase in these effects since the 1980s (Belley and Lochner 2007, Bailey and Dynarski 2011, Lochner and Monge-Naranjo 2011. A few papers do attempt to identify valid instruments for parental income during adolescence (e.g., Akee et al 20108 , Lovenheim 2011, and Lovenheim and Reynolds 20139 , Manoli and Turner 2014 ). I estimate much smaller effects per dollar of annual parental income than these prior studies, and argue that my estimates are less likely to suffer from selection and more consistent with survey data on parental college spending.…”

The impact of diminished housing wealth on health in the United States: Evidence from the Great Recession

“…First, life-cycle models suggest that households adjust their consumption and labor supply whenever they receive new information regarding lifetime wealth. Several empirical studies show that unrealized home equity gains/losses have consumption effects (Campbell and Cocco, 2007;Lovenheim and Reynolds, 2013). Second, a change in housing wealth can affect consumption by relaxing or tightening borrowing constraints.…”

The Effects of Merit-Based Scholarships on Educational Outcomes

“…These variables are the unemployment rate obtained from the Bureau of Labor Statistics' Local Area Unemployment Statistics (LAUS) and the average weekly wage from Bureau of Labor Statistics' Quarterly Census of Employment and Wages (QCEW). 14 A number of studies have tested the impact of housing wealth on college choices and find that increases in housing wealth can lead to an increases in college enrollment (Lovenheim and Reynolds 2013;Lovenheim 2011) and that these effects are different across different types of institutions (McCollum and Upton 2014). Therefore the state-level housing price index published by the Federal Housing Finance Agency (FHFA) is also used as a covariate.…”