| BUSINESSWEEK ONLINE : JANUARY 29, 2001 ISSUE | |||||
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| ECONOMIC TRENDS
When Schools Get Graded Home prices tend to react quickly If George W. Bush gets his way, federal aid to education will be tied to a system by which public schools receive letter grades based on student performance. Indeed, a number of states already have such grade systems, which are intended as a wake-up call for schools and parents. As a recent Florida study indicates, however, such school grading can sometimes have unforeseen consequences. In the study, David N. Figlio of the University of Florida and Maurice E. Lucas of the Alachua County School Board analyzed the pattern of home resale prices in the Gainesville school district before and after the implementation of a state system in 1999 that assigned letter grades to 22 elementary schools in the area. Controlling for neighborhood quality, past price trends, and home improvements, the researchers found that the grades had a substantial immediate impact on prices. Over the 14-month post-announcement period studied, houses in A-rated school neighborhoods commanded an average premium of 7%, or $9,000, over houses in B-rated school neighborhoods. A similar effect was evident between B and C school neighborhoods. To be sure, the price impact tended to diminish over time, but it's well known that perceived school quality influences home prices, and letter grading could exacerbate this tendency. The problem, says Figlio, is that new grading systems can have arbitrary criteria (such as giving more weight to improved reading scores than to improved math scores) that may dramatically affect homeowners' wealth. By GENE KORETZ With James M. Mehring in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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