Parents, peers, or school inputs: Which components of school outcomes are capitalized into house value?

Previous research has established that people bid more for houses in high-performing school districts. But what specific factors related to school outcomes influence house prices: the parents, the peers, or the school inputs? We study the extent that house values are affected by each of the components of an education production function. Based on 123 school districts and 26,000 house transactions, we find that parental inputs are the primary component of school outcomes that are capitalized into house prices. In the explanation of variations in house prices, variations in parental characteristics are at least seven times more important than similar variations in the influence of peer groups. We find no influence on house prices from variations in school inputs. This result suggests that land values in a particular community will be increased more by attention to zoning laws that influence the mix of renters to homeowners and the type of households entering a community compared to investing in additional public school inputs.