China Economic Quarterly International 1 (2021) 29–42

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China Economic Quarterly International

journal homepage: www.keaipublishing.com/en/journals/china-economic-quarterly-
international

Winning at the starting line: The primary school premium and

housing prices in Beijing
Xuan Han a, Yan Shen b, Bo Zhao b, *
a
School of Economics, Beijing Technology and Business University, Beijing, 100048, China
b
National School of Development, Peking University, Beijing, 100871, China

A R T I C L E I N F O A B S T R A C T

JEL classification: Using housing transaction data from Beijing during 2013–16, this paper evaluates the education
R31 premium for good primary schools and its changes. We use the regression discontinuity method to
I24 estimate the average education premium and its variation year by year. We take advantage of
R5
differences in the right to school enrollment between homeowners and renters to determine the
Keywords: discontinuity boundaries. Furthermore, the difference-in-differences method is applied to inves-
Housing prices
tigate the changes in housing prices triggered by changes in the school attendance zones. We find
Good school attendance zones
that the average education premium for the top 59 high-quality primary schools in Beijing was
Education premium changes
about 11% and increased each year. During the sample period, the increase accumulated to more
than 50%. The changes in the school attendance zones led to a significant 1.5%–3.5% rise in
housing prices. This shows that it would be better to increase the supply of quality education
rather than only guiding the demand for it to promote educational equity.

1. Introduction

Housing has always been an important aspect of living conditions and focus of discussion in economics. However, China’s high
economic and income growth over the past three decades has been accompanied by rapidly increasing housing prices. Fang et al. (2016)
report that the annual real growth rate of housing prices in China’s first-tier cities was about 13% from 2003 to 2013, equivalent to a
fourfold increase over 11 years. The rise in housing prices has also driven an increase in rents. In 2018, per capita expenditure on
housing in China was 4647 yuan, accounting for 23.4% of per capita consumption expenditure.1 Although the rise in housing prices
could promote the development of the urban real estate industry and increase the wealth of homeowners, it also increases the burden of
affordability for renters and those seeking to purchase a home. Rising housing prices may force high-end labor to move out of cities with
high housing prices (Jeanty et al. 2010), thus reducing the competitiveness of cities. For example, high housing prices lead to “upside
down” corporate profit margins and total factor productivity, which hinders the development of industries other than real estate (Chen
et al. 2015). Miao and Wang (2012) argue that high housing prices make enterprises shift the focus of investment, which reduces in-
vestment in research and development and inhibits enterprise innovation. High housing prices also induce an increase in speculative
capital inflows, crowding out investment in the real economy (Zhao 2015; Chen and Wen 2017). The Central Committee of the
Communist Party of China, with Comrade Xi Jinping at its core, has pointed out that “houses should be used for living, not for spec-
ulation,” indicating that the government places greater emphasis on the residential nature of housing.

* Corresponding author. National School of Development, Peking University, Beijing, 100871, China.
E-mail addresses: hanxuan@btbu.edu.cn (X. Han), yshen@nsd.pku.edu.cn (Y. Shen), zhaobo@nsd.pku.edu.cn (B. Zhao).
1
The data are from the National Bureau of Statistics: 2018 per capita residential consumption expenditure.

https://doi.org/10.1016/j.ceqi.2020.12.001
Received 2 August 2020; Received in revised form 7 December 2020; Accepted 9 December 2020
Available online 27 January 2021
2666-9331/© 2021 The Authors. Publishing services by Elsevier B.V. on behalf of KeAi Communications Co. Ltd. This is an open access article under
the CC BY license (http://creativecommons.org/licenses/by/4.0/).
X. Han et al. China Economic Quarterly International 1 (2021) 29–42

In addition to providing a basic need, housing also provides access to public primary educational resources. Since China’s reform and
opening up, the increase in the rate of return on education and the widening income gap have caused Chinese parents to want their children
to be able to “win at the starting line.” Thus, Chinese parents have become increasingly willing to invest more in their children’s primary
education (Doepke and Zilibotti 2019).2 In addition to direct educational expenses, such as afterschool tutoring and textbooks, the purchase
of housing in good quality school attendance zones (SAZs) has become the main form of parents’ investment in their children’s education.
In urban China, primary school enrollment is guided by the “nearby enrollment” rule based on the location of a child’s hukou
(household registration), which is often tied to the family’s homeownership. Because of the uneven distribution of quality educational
resources, families do their best to buy houses in high-quality primary SAZs, to enable their children to attend high-quality primary
schools. Thus, the price of real estate in high-quality primary SAZs contains a premium due to the additional educational resources
attached.3
The huge influence of the education premium on the purchase of SAZ housing may exacerbate social stratification (Zhang and Chen
2018). Therefore, it is of great practical significance to study the impact of educational resources on SAZ housing prices. The main
challenge of estimating the education premium is that the average price difference between high-quality SAZ housing and ordinary
housing does not equal the education premium. The housing price difference also includes the impact of neighborhood characteristics.
For example, some good SAZs are located in neighborhoods with better traffic control, so that housing in those areas may be more in
demand than housing in other neighborhoods. Thus, using the average price difference between SAZs to estimate the housing premium
may lead to overestimation. Furthermore, the housing in some good SAZs is more likely to be older and smaller, so the average price
differences would underestimate the education premium.
To solve the endogeneity caused by neighborhood effects, Black (1999) proposes using a boundary discontinuity design to remove
the variation among neighborhoods. Black finds that parents were willing to pay 2% more for a 5% increase in school test scores. But
differences in the quality of the neighborhoods were not taken into account. Bayer, Ferreira, and McMillan (2007) further control the
demographic characteristics of neighborhoods based on the regression discontinuity (RD) method. They find that the increase in
housing prices corresponding to the improvement in student performance was less than 1%. Gibbons and Machin (2003) and Gibbons
et al. (2013) find that the education premium was about 3% based on British data, and the better the school was, the higher the ed-
ucation premium was. Fack and Grenet (2010) and Davidoff and Leigh (2008) find education premiums of high-quality schools of about
2% and 4% using data from France and Australia, respectively.4
The relationship between education and housing prices has been a focus of research in China. Using data on the average monthly
prices of resale housing in 52 areas in Shanghai during 2003–07, Feng and Lu (2010) take three rounds announcements of high-quality
schools as a natural experiment to estimate the influence of exogenous changes in the quality of education on housing prices. Their
results show that one more high-quality school brings an increase of 20% in the average price of housing. Hu, Zheng, and Wang (2014)
collected data on resale housing prices and rents in the neighborhoods around good SAZs in 2011. Taking advantage of the different
enrollment rights of renters and owners, they find that the estimated premium for good primary schools in Beijing was 8.1%.
Chan et al. (2019) use housing transaction data in Shanghai from 2015 to 2016. They find a 14% premium for the top 10% of schools,
using “competition scores” as quality indicators. Table 1 summarizes the main literature on this topic that uses RD methods.
In the literature, estimates of the education premium in China range from 8.1% to 20%, which is generally higher than the results
obtained for other countries, reflecting the high demand of Chinese urban families for quality educational resources. With the devel-
opment of urbanization, the distribution and premium of high-quality educational resources within cities are also changing. Accurate
estimation of the high-quality education premium and its changes is important to understand the allocation of urban educational re-
sources together and relevant policy formulation.
However, due to data availability and other reasons, the existing literature has not fully solved the problem. On the one hand, the
studies have all assessed the education premium over a given period of time, but they have not discussed whether the premium has
changed over time. However, the trend of the premium could be an important reference for decision makers. On the other hand, except
for Feng and Lu (2010), who focus on the impact of exogenous changes on housing prices caused by natural experiments, other studies
have not included the changes in SAZs because the sample span is too short to do so. The list of good primary schools and the boundaries
of SAZs have changed over a longer period for a variety of reasons. If these changes are not carefully considered, estimation of the
education premium may be biased.
We collected data on nearly 140,000 resale housing transactions and nearly 160,000 rental housing transactions from 2013 to 2016,
aiming to estimate the premium for good primary schools in Beijing. In terms of research strategy, the paper starts by identifying high-

2
Using data from the China Health and Nutrition Survey, Fang et al. (2012) find that the annualized total return to education in China was nearly
20% on average from 1997 to 2006. Zhang et al. (2005) find that the rate of return to education in China was increasing year by year. Piketty, Yang,
and Zucman (2019) find that the income share of the top 10% of Chinese households increased from 27% in 1978 to 41% in 2015, while the income
share of the bottom 50% of low-income households decreased from 27% in 1978 to 15% in 2015.
3
Theoretically, the sorting model proposed by Tiebout (1956) finds that the prices of housing in equilibrium are consistent with the preferences of
residents in the corresponding regions; therefore, higher housing prices reflect people’s valuation of the attached public goods (such as education).
Subsequently, based on this theory, researchers have conducted theoretical and empirical studies on the correlation between educational resources
and housing prices in the surrounding areas. Bayer, Ferreira, and McMillan (2007) obtain a one-to-one correlation between the regression coefficient
of the price of housing and the preference distribution of households. The researchers deduce that when all households are homogeneous (het-
erogeneous), the coefficient on high-quality school zones equals the (average) marginal rate of substitution of high-quality educational resources and
currency.
4
For a detailed review of the literature on estimation of education premiums, see Black and Machin (2011) and Nguyen-Hoang and Yinger (2011).

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Table 1
Literature on the education premium: Region, data, and results.
Literature Region Data Results Notes

Black (1999) Boston, United More than 20,000 real estate For a 5% increase in school The control of neighborhood quality does not
States transactions and student test scores scores (1 SD), house prices account for differences in residents’
from 1993 to 1995 rise by 2%. characteristics.
Gibbons and England Average housing price and passing rate For a 1 SD rise in school The analysis combines the RD and IV methods.
Machin in primary math in more than 7000 quality, house prices rise
(2003) postal districts from 1996 to 1999 4%–9%.
Gibbons and London, England Property transactions and passing rates For a 10% rise in school The analysis combines RD, IV, and other
Machin on all primary school subjects from quality, house prices rise methods; the closer the house is to the school, the
(2006) 1997 to 2002 3.8%. higher is the premium.
Bayer et al. San Francisco Household property information from For a 5% rise in school The analysis is based on Black (1999) and finds
(2007) Bay Area, United 1990 census data and primary school quality, house prices rise that controlling the demographic characteristics
States math scores 1%. of the neighborhoods greatly reduces the
premium.
Davidoff and Australia 580 transaction records and University For a 1 SD rise in school Houses within 600 m of the school district
Leigh Capital district Admission Index of schools in quality, house prices rise boundary are compared.
(2008) 2003–2005 3.5%.
Fack and Paris, France Real estate transactions and scores of For a 1 SD rise in school Private schools help reduce the school premium.
Grenet secondary schools in 1997–2004 quality, house prices rise
(2010) 1.4%–2.4%.
Feng and Lu Shanghai, China Monthly panel data of resale housing One more good school The analysis takes the designation of “high-
(2010) transactions from 2003 to 2007 brings a 20% increase in quality school” as a natural experiment and
the average price of estimates the impact of exogenous changes in
housing. school quality.
Hu et al. Beijing, China Average house prices and rents of The 40 “key” primary The premium is estimated using the “different
(2014) resale housing in SAZs in autumn 2011 schools in Beijing have a rights of renters and owners."
premium of 8.1%.
Chan et al. Shanghai, China Housing transaction data and ranking The premium for the top The change in the premium caused by SAZ
(2019) of primary schools’ “competition” 10% of primary schools is change is investigated at the community level.
scores in 2015–16 about 14%.

Note: IV ¼ instrumental variable; RD ¼ regression discontinuity; SAZ ¼ school enrollment zone; SD ¼ standard deviation.

quality primary schools and their corresponding SAZs, and then it controls other factors affecting the price of housing. In identifying
high-quality primary schools, the existing literature uses student competition test scores to measure school quality, or a relatively dated
standard, such as municipal “key” primary schools, as the quality indicator. In this paper, we build a comprehensive indicator that
includes 59 good primary schools, using three sources of long-term reputation lists of high-quality schools, which are the main refer-
ences that parents use when deciding to purchase housing in an SAZ.
To identify the high-quality schools corresponding to the attendance zones, we collected the admission brochures of the 59 schools
and built an exact match between the schools and the communities that have the right to enroll in those schools.
We adopt the following strategies to estimate the SAZ housing premium. First, rents are taken as a comprehensive index and an
indirect control for neighborhood quality, and the boundaries for applying the RD design are determined. Then, following Black (1999),
we use the RD method to estimate the average premium for high-quality education in housing prices. Furthermore, the trend of the
premium is investigated by yearly regression. Finally, the difference-in-differences (DID) method is used to evaluate the changes in
housing prices caused by the changes in SAZs, by using a subsample of neighborhoods in which the SAZs have changed.
There are three main findings. First, from 2013 to 2016, the average premium for the 59 high-quality primary schools was around
11%. Second, the premium increased over the sample period. Third, SAZ changes were followed by significant changes in housing
prices, ranging from 1.5% to 3.5%.
The main contributions of the paper are the following. First, we collected nearly 300,000 resale housing and rental housing
transaction records, together with the brochures of high-quality primary schools from 2013 to 2016. Based on these data, we built a
detailed SAZ-housing matching data set for Beijing. Considering the degree of detail and timespan of the variables, the paper provides a
data set as detailed as possible to study the education premium and its changes in Beijing. Second, the paper investigates the trend of the
premium, thus providing a reference for understanding the possible variation in the premium in the future. Third, the paper evaluates
the impact of SAZ rezoning on housing prices. We find that there is a lag in the change in the price of housing after the SAZ changes. On
the one hand, the lag could be related to the high transaction costs in the real estate market; on the other hand, it could reflect the
concerns of urban families about the uncertainty in SAZ changes. In any case, the positive premium remains unchanged.
Although a series of policies, such as the nearby enrollment rule, were designed to promote educational equity, the increasing
education premium reflects that the problem of unfair enrollment opportunities has not been properly solved. On the contrary, it is
becoming increasingly fierce.5 In addition, with urbanization, cities are experiencing a rapid increase in the migrant population. Against

5
Yang et al. (2008) propose that the fairness of the distribution of educational resources and changes in income will affect each other, but they do
not deal with the impact of school attendance policy reforms on educational resource distribution and housing price changes in the future. In March
2017, the Beijing Municipal Education Commission implemented a series of reform policies aimed at promoting fairness, by introducing “Multi--
school Partitioning.” However, this period is not covered in our sample; we plan to discuss it in future research.

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the background that new and old urban families attach great importance to their children’s education, SAZs change with urban
development. The education premium would still exist in the price of housing in newly developed SAZs. Thus, the nearby enrollment
policy, which restricts and guides the demand for purchasing housing, cannot achieve the goal of promoting educational equity. In
addition to these demand-side policies, we also need to consider how to guarantee the equity of primary education from the supply side.
Although this paper focuses on Beijing, many cities in China and abroad are facing the policy of nearby enrollment and increasing
urbanization. Therefore, the data collection, research ideas, estimation strategies, and findings of this paper could be generalized.6
The structure of the paper is as follows. Section 2 introduces the background of primary education and the real estate market in
Beijing. Section 3 describes the housing price and school data, identification of variables, and statistics. Section 4 discusses the empirical
strategies, results, and robustness test. Section 5 concludes.

2. Primary education system and housing prices in Beijing

As it is the capital of the country, the development of primary education and the real estate market in Beijing has attracted a great
amount of attention due to its role as a weathervane. Since the 1980s, to promote equity in educational opportunity, the municipal
government of Beijing has strictly implemented the principle of nearby enrollment by canceling the unified examination. Currently, the
allocation of high-quality educational resources is linked to homeownership. At the same time, along with the reform of the real estate
system, the homes of urban families have gradually entered the real estate market and may be traded openly. This provides an op-
portunity to estimate the education premium and evaluate the effectiveness of policies aiming to promote equity in education. In this
section, we introduce the history of the primary education system and housing prices in Beijing.

2.1. Primary education system

The allocation of high-quality education is related to the fairness of educational opportunity. Enrollment in China’s compulsory
education is divided into two stages: kindergarten to primary school and primary school to junior high school. The Compulsory Edu-
cation Law of the People’s Republic of China of 1986 clarified the principle of nearby enrollment, which means that children should be
enrolled in primary school according to the distance between the child’s registered residence (housing allocation most of the time) and
the school.7 In 1993, Beijing abolished the unified elementary school graduation examination, which was organized by districts and
counties, and stipulated that students should be enrolled in their nearby schools at the primary-to-junior high school stage, but there
could be “recommended students” that do not follow the nearby enrollment rule. This policy gradually changed the process of
enrollment in schools from choosing schools based on grades to choosing schools based on hukou and ability.
Beijing began binding the right to primary school enrollment to household location and built a computerized system to generate the
enrollment lists of the primary schools. In 2005, Beijing strictly implemented the policy of examination-free nearby enrollment. The city
has banned the enrollment of students through the “recommended students” process since 2012. In 2014, the Ministry of Education
required all districts and counties in 19 major cities, including Beijing, to implement the nearby enrollment rule. In the same year, the
Beijing Municipal Commission of Education clearly announced the nearby enrollment rule and promoted the nine-year education
system.8 Through the establishment of an electronic verification system between the Compulsory Education Enrollment System and the
policy department in Beijing, information on each student’s household registration, residence, and school enrollment has been clearly
recorded, enabling strict control of the primary school enrollment process.
There are differences in the quality of education across schools, and the rules bind households’ registration of their children in the
kindergarten-to-primary and nine-year education system. Thus, to get their children enrolled in a good junior high school, parents must
begin by purchasing a home located in a high-quality primary SAZ.
In the 1950s, 40 high-quality primary schools, or “key primary schools,” were identified in Beijing. Later, this category was removed
for the sake of fairness in educational opportunities, but parents can still find lists of high-quality schools based on history and various
educational indicators. As a result, housing in the high-quality SAZs is commonly known as “school district housing,” since parents bid
for those homes to obtain the right to enroll their children in those schools, and the prices of those homes have continued to increase. To
control the price of housing, Beijing introduced a series of regulation policies.9 But the nearby enrollment rule has made it more and
more likely for wealthy families to send their children to high-quality schools. Thus, the price of housing in these SAZs has become
higher and higher, and the price gap between housing in those SAZs and neighboring SAZs has grown larger and larger.10

6
The conclusions of this paper are especially applicable to megacities with higher income levels and more concentrated educational resources
(such as Beijing, Shanghai, Guangzhou, and Shenzhen), but there are also slight differences between cities. For example, private basic education in
Shanghai has developed rapidly. We thank the anonymous reviewers for their suggestions.
7
According to the Detailed Rules for the Implementation of the Education Law of the People’s Republic of China in 1992 and the subsequent
Compulsory Education Law in 2006.
8
That is, each junior high school is binding for particular primary schools, and students in those primary schools may enter that junior high school
much more easily than others.
9
For example, in 2010, it was stipulated that the down payment for a family’s first home should not be less than 30%, and the down payment ratio
is often adjusted. As of October 2019, the down payment ratio for the first home of families without loans in Beijing is no less than 35%, and the down
payment ratio for their second home is no less than 60%. In 2010, Beijing officially launched the purchase restriction policy. In 2011, it further
stipulated that Beijing households could only purchase two residences. In 2017, individual commercial housing purchases were restricted.
10
Taking Zhongguancun No. 3 Primary School in Beijing as an example, our sample data show that the price of housing in its enrollment area in
2016 was as high as 110,000 yuan/square meter, while the price of housing in other nearby areas was only around 70,000 yuan/square meter.

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2.2. Resale housing market

The development of the real estate market in Beijing during the past two decades can be viewed as the epitome of the real estate
market in China’s first-tier cities. Fig. 1 shows the changes in the price of housing in Beijing from 1999 to 2016. The State Council clearly
proposed to “gradually implement the monetization of housing distribution” in 1998. The People’s Bank of China cooperated, putting
forward the following slogans: “abolishing the welfare public housing system,” “opening up the financial system,” and “liberalizing
consumer credit,” which marked the official launch of the real estate market reform. In 1999, housing prices in Beijing were around
4787 yuan per square meter (m2). As the real estate industry began to be established as the pillar industry of the national economy in
2003, housing prices began to rise in Beijing. According to the housing price index calculated by Fang et al. (2016), Beijing saw the most
obvious increase in housing prices among the first-tier cities, with the average price of housing in Beijing increasing by more than seven
times from 2003 to 2013. According to the National Bureau of Statistics, the annual growth rate of the price of housing in Beijing from
2003 to 2016 reached 16%.
The period from 2013 to 2016 could be viewed as a new round of rising housing prices in Beijing, so we take the resale housing and
rental transaction data during this period to estimate the education premium.

3. Data and empirical strategies

This section introduces the data and empirical strategies used in this paper: the resale housing transaction and rental data, method of
identifying high-quality schools, method of matching schools and SAZs, descriptive statistics, and the three econometric models used in
the analysis.

3.1. Resale housing transaction data and rental data

We collected detailed data from the resale and rental records from January 2013 to December 2016 from the largest real estate
agency in Beijing. Since the high-quality educational resources in Beijing are mainly distributed in the central urban area, and there has
been little new real estate there in recent years, we focus on the resale housing market in the six central districts to estimate the ed-
ucation premium.11 A total of 139,900 valid observations were obtained for resales and 157,7000 for rentals.
Before proceeding with the empirical analysis, we evaluate the representativeness of the data from the perspectives of market share
and housing price growth rate.
Fig. 2 compares the annual trading volume of the sample data and the corresponding market share from 2013 to 2016. The market
share is calculated by dividing the total number of resale housing transactions published in the Beijing Real Estate Statistical Yearbook
by the sample data volume. It can be seen from the figure that the volume and relative market share present an upward trend from 2013
to 2016, and the market share reached over 50% by 2016.
Fig. 3 compares the growth rate of the average price of housing each month with the Beijing housing price index published by the
National Bureau of Statistics. The year-on-year growth rate of the price of housing in the sample data is calculated by comparing the
average price each month with that of the same month in the previous year. The figure shows that the two growth rates appear to have
similar trends: both gradually declined in 2014 and reached a trough in 2015, followed by a rise until the end of 2016. These two
sequences are not exactly the same, as the Beijing index includes prices of new housing. However, in general, the sample data used in this
paper have a large trading volume, high market share, and similar trend compared with the performance of the entire market. Thus, the
sample is fairly representative.
The sample data contain abundant information on housing, including the real transaction price (sale or rent), transaction date,
characteristics of residential housing, demographic characteristics of buyers and sellers, and so forth. In addition, according to the
geographical location of the housing, we match the features of the surroundings to the housing, such as the nearest subway station and
its distance, the local district and ring road number, and details on the business area.

3.2. Identification of high-quality schools

According to the nearby enrollment rule, households in all the residential communities in Beijing may send their children to the
corresponding nearby primary schools. So housing in those communities can be called school district housing, in the broadest sense. In
the general sense, school district housing is related to high-quality primary schools. Before we estimate the primary school premium, we
first need to define the standards for a good primary school. There are two options for measuring the quality of education: continuous
indicators and discontinuous indicators. The continuous indicators include input variables, such as the amount of school investment,
number of teachers with high-level credentials (Brunner et al., 2002), and so forth, and output variables, such as students’ examination
scores and other types of competition and test scores (Black 1999; Figlio and Lucas 2004; Bayer et al. 2007; Chan et al., 2019). The
discontinuous indicators identify the list of excellent primary schools according to various rating systems. With the rapid development of
urban areas, the key primary school rating system from the 1950s would not be appropriate to reflect the current quality of primary
school education. Therefore, we collected three lists of high-quality primary schools from real estate agencies and the commonly used
primary school social networking platform BBS. From these, we identified the 59 primary schools that rank the highest in reputation

11
The six central districts include Dongcheng, Xicheng, Haidian, Chaoyang, Fengtai, and Shijingshan.

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Fig. 1. Average housing prices in Beijing, 1999–2016 (10,000 yuan/square meter).

Note: The data are from the National Bureau of Statistics.

Fig. 2. Number of transactions and market share of the source real estate agency.
Note: The total market transaction volume comes from the resale housing transaction volume published in the Beijing Real Estate Statistical Yearbook.

among the 489 primary schools in the six central districts of Beijing. For the empirical analysis, we take this group of 59 schools as the
“high-quality primary schools."12
Fig. 4 shows the average prices of housing in the central urban area of Beijing and the locations of the 59 high-quality primary
schools. In the figure, the depth of the background color represents the average housing price per square meter in this area, and the black
dots mark the locations of the high-quality primary schools. All 59 schools are located in four central districts: Xicheng, Dongcheng,
Haidian, and Chaoyang. Among them, Xicheng district has 21 high-quality primary schools, accounting for 35.6% of the total, ranking
first among all the districts.
Every June, Beijing’s public primary schools issue printed paper brochures listing the names of the residential communities and
buildings in their attendance zones. Through school information websites or the BBS social networking platform and other channels, we
collected and digitized photos of the brochures of the 59 high-quality primary schools from 2013 to 2016. Then we matched the schools
with the residential communities or buildings in which housing has been transacted in our sample. When the name of a community in a
brochure failed to match the name of the community in the sample, we examined the locations of the two communities based on the

12
In the literature, the most commonly used list of high-quality primary schools in Beijing is the 40 municipal “key primary schools” designated by
the Beijing Education Bureau in the 1950s. To test their representativeness, we compared the list of 59 primary schools with the list of 40 municipal
key schools. In addition to the key municipal primary schools outside the six districts, the list of 59 primary schools covers 90% of the key municipal
primary schools, which indicates the representativeness of the list selection in this paper. According to Hu, Zheng, and Wang’s (2014) research, the
premium of the 40 municipal key primary schools in Beijing is around 8%, slightly lower than the 11% obtained in this paper. This also shows that
the definition of 59 primary schools is more effective in measuring changes in the quality of primary education over time.

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Fig. 3. Monthly housing price growth rate (year-on-year) in the sample data and the Beijing housing price index.
Note: The solid line represents the Beijing housing price index published by the National Bureau of Statistics, and the dotted line is the monthly year-
on-year housing price growth rate obtained based on the sample data.

geographic information system to check whether the two communities overlap, or consulted with local real estate agents to verify the
attendance zones, to achieve accurate matching of the resale housing transaction records with the schools.
According to the brochures, the attendance zones of some high-quality primary schools changed during the sample period.13
Considering the changes in the corresponding primary schools, we divided the housing transacted in the sample into the following three
categories:

 Ordinary SAZs (A0): housing not included in high-quality SAZs between 2013 and 2016 (90.7% of the sample)
 Initial high-quality SAZs (A1): housing included in high-quality SAZs at least since 2013 (7.4% of the sample)
 Newly added high-quality SAZs (A2): housing included in high-quality SAZs after 2013 (1.9% of the sample).

In the sample period, we do not find cases in which housing in high-quality SAZs changed to ordinary SAZs, so the newly added high-
quality SAZs (A2) are those that were initially in ordinary SAZs but then rezoned into the attendance zones of high-quality primary
schools.

3.3. Description and prices of housing in the SAZs

Table 2 describes the characteristics of resale housing transactions during the sample period, by SAZ category.
From Table 2, first, high-quality educational resources are scarce. Overall, the 59 high-quality primary SAZs account for only 8% of
the housing transactions. Second, the average price of housing in the high-quality SAZs is significantly higher than that in the other
SAZs. The average price in the total sample is about 44,400 yuan/m2, and that in the initial high-quality SAZs is as high as 63,800 yuan/
m2. The average price in newly added SAZs follows, at 60,100 yuan/m2, and the average price in ordinary SAZs is 42,500 yuan/m2.
Third, the initial high-quality SAZs have a location advantage: they are more likely to be within the 2nd Ring Road or the 3rd Ring Road,
which marks the center of the city. Fourth, houses in the initial high-quality SAZs tend to be “old, small, and ragged.” The average age of
the housing in the initial high-quality SAZs is more than 22 years, which is five years older than the average age of housing in the
ordinary SAZs. The proportion of housing with refined decoration in high-quality SAZs is about 4 percentage points lower than that in
ordinary SAZs, and housing in initial high-quality SAZs has the lowest proportion of elevators among the three subsamples. The average
area of housing units in high-quality SAZs is 5.7 m2 less than that in ordinary SAZs. Fifth, the sellers of housing in high-quality SAZs are
about seven years older than the sellers of ordinary housing, but there is no significant difference in the ages of the buyers, indicating
that it is likely that the sellers of high-quality SAZ housing do not have primary school–age children.

3.4. Empirical strategies

To estimate the education premium, it is necessary to consider all the differences between high-quality SAZ housing and ordinary
SAZ housing, including housing features and other aspects. This paper adopts three methods to do so. First, the ordinary least squares
(OLS) estimation method is used for the benchmark. Second, the RD method, which is commonly used in the literature, is applied.
Finally, we introduce the DID method.

13
For example, during the sample period, Zhongguancun No. 3 Primary School (Wanliu Department) in Haidian District, Beijing, added the “new
starting point Jiayuan” community to its SAZ in June 2015, followed by the addition of the “Shanshui Tiancheng” community in June 2016.

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X. Han et al. China Economic Quarterly International 1 (2021) 29–42

Fig. 4. Average housing prices and locations of high-quality primary schools in Beijing.
Note: The background color in the figure represents the average housing price in the corresponding area. The closer the color is to red, the higher the
housing price is. Black dots mark the locations of high-quality primary schools as defined in this paper. The urban boundaries and road information in
the figure are based on the administrative division adjustment of the Ministry of Civil Affairs in 2017. The map is made from national vector data at
the county level in 2015, which are published on the internet.

Table 2
Descriptive statistics of the main variables, by SAZ subsample (resale housing transactions).
Sample mean Significance of differences

All Ordinary SAZs Initial high-quality SAZs Newly added SAZs

A0 A1 A2 A1 – A0 A2 – A0
2
Housing price (10,000 yuan/m ) 4.44 4.25 6.38 6.01 2.13*** 1.76***
Proportion of high- quality SAZs 0.08 0.00 1.00 0.40 1.00*** 0.40***
Housing characteristics
Building area (m2) 79.53 80.08 74.31 73.73 5.76*** 6.34***
Age (years) 17.48 17.04 22.59 18.53 5.55*** 1.49***
Refined decoration 0.40 0.41 0.37 0.36 0.04*** 0.05***
Simple decoration 0.29 0.28 0.34 0.35 0.06*** 0.07***
Elevator 0.64 0.65 0.54 0.65 0.11*** 0.00
Buyer and seller characteristics
Seller’s age (years) 51.94 51.36 58.02 55.92 6.65*** 4.56***
Buyer’s age (years) 38.95 38.93 39.19 39.21 0.26** 0.28
Spatial fixed effects
Within the 2nd Ring Road 0.07 0.05 0.13 0.57 0.08*** 0.52***
2nd to 3rd Ring Road 0.22 0.21 0.38 0.24 0.18*** 0.03***
3rd to 4th Ring Road 0.27 0.28 0.26 0.19 0.02*** 0.08***
Observations 139,904 126,896 10,292 2716 – –

Note: Descriptive statistics of explanatory variables and main control variables are listed in the table. Other control variables included in the regression
are described in section 3.4; they are not listed here to save space. Columns (1) to (4) show the mean values of the corresponding variables in the whole
sample and subsamples, respectively. Columns (5) and (6) show the differences and significance between the A1 or A2 and the A0 subsamples, where
***p < 0.01, **p < 0.05.

3.4.1. OLS method

The benchmark model for the OLS method is

lnPriceit ¼ C þ βkeyit þ λX þ εit ; (1)

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X. Han et al. China Economic Quarterly International 1 (2021) 29–42

where lnPriceit is the natural logarithm of the real price of housing unit itraded in academic year t (based on the price in 2013)14; keyit is a
dummy variable that equals 1 if the traded housing unit is in a high-quality SAZ; and εit is the error term. Control variable X includes the
characteristics of the housing, buyers, and sellers and the time and spatial fixed effects.15

3.4.2. RD method
The RD method focuses on samples along the SAZ boundaries to control the differences in the neighborhoods, to solve the endo-
geneity problem caused by “sorting effects.” Specifically, based on the OLS benchmark setting, we add a variable indicating the SAZ
boundary, boundarym , which represents the closest high-quality SAZ boundary to the traded housing unit and is labeled m:

X
M
lnPriceit ¼ C þ βkeyit þ ρm boundarym þ λX þ εit  (2)
m¼1

The key to the RD method is to determine the width of the ribbon of area along the SAZ boundaries and ensure that there are no
statistically significant differences in neighborhood characteristics within this area. We found that when the school district boundaries
were narrowed from 1000–500 m, there were still significant differences. Therefore, the real rent per square meter is used as a
comprehensive index of housing and neighborhood quality. Since renters do not have the right to enroll their children in nearby schools,
the rents would not include the value of the high-quality primary schools, but the quality of the neighborhood should be included in the
rents.

3.4.3. DID method

An important assumption to apply the RD approach is that the boundaries of the SAZs remain basically unchanged, which seems to be
quite strict during a period of rapid urbanization. Of all the housing transactions, 1.9% occurred in the newly added SAZs, that is, the A2
sample. Therefore, the DID method can be used to estimate the education premium. We take the surrounding ordinary housing A0 as the
control group and the “changed SAZ” housing A2 as the treatment group. After matching the housing in A2 with the nearest ordinary
housing in A0, the DID method can be used to analyze the changes in the price of housing triggered by the changes in SAZs:

X
N X
M
lnPriceit ¼ C þ βkeyit þ δtreatmenti þ γt þ μn matchn þ ρm boundarym þ λX þ εit (3)
n¼1 m¼1

where the DID regression controls the treatment group effect treatmenti and the time trend γt along with the controls in the OLS setting.
When treatmenti equals 1, the corresponding primary school has changed from ordinary to high quality. When γt equals 1, the housing
has transitioned after the change in SAZs. The model also controls for the fixed effects of pairing communities μn : a total of N matching
groups are established between housing units in the treatment group and the closest ordinary housing unit. matchn represents the nth
match in the total N matching pairs.
Further, by combining the RD and DID methods, we limit the distance between the matching pairs to 500 m. Then we investigate the
changes and magnitudes of the changes between the price of “changed SAZ” housing units and the average housing prices within 500 m.
In this way, the estimated coefficient βd d
DID can be regarded as the change in price due to the SAZ upgrade. By comparing it with βRD , we
can see whether the education premium of the newly added SAZ housing catches up with that of the initial high-quality SAZs over a
short period.

4. Empirical results

This section reports the empirical results based on the OLS, RD, and DID methods. The OLS regression uses the whole sample, the RD
regression uses the sample of SAZs that have not changed (A0 and A1), and the DID analysis focuses on the changed sample and ordinary
SAZ houses (A0 and A2).
Before applying the RD method, we use rent as the comprehensive indicator to determine the width of the SAZ boundaries. If there is
no significant difference between the rents for SAZ and ordinary housing within a certain distance along the boundary, we could say that
the comprehensive quality is similar for these two types of housing. Table 3 presents the process for determining the boundary width.
From columns (1) to (3), we estimate the difference in rents in the following three cases, respectively:

(i) Distance not limited

14
The academic year is determined according to the time when primary schools issue brochures, from June of this year to May of the following year.
For example, June 2013 to May 2014 is noted as the 2013 academic year. Use of the academic year is consistent with the transaction cycle of SAZ
housing and parents’ purchasing pattern.
15
The control variable X contains the following variables. Housing characteristics: building area and its square, age, decoration (refined, simple, and
rough room (benchmark group)), floor (low, middle, high, and basement (benchmark group)), whether there is an elevator, whether there is a
subway station within 100 m, and the type of housing (number of rooms and living rooms). Characteristics of buyers and sellers: age and its square,
gender, and province of birth. Time fixed effects: dummies for the calendar year and academic year. Spatial fixed effects: number of ring roads,
districts, subdistricts (48), and business areas (168).

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X. Han et al. China Economic Quarterly International 1 (2021) 29–42

Table 3
Determination of the width of SAZ boundaries:The natural logarithm of real rents as dependent variable.
RD RD RD

A0 þ A1 A0 þ A1 (1000 m) A0 þ A1 (500 m)

(1) (2) (3)

High-quality SAZ 0.018*** 0.009* 0.002

(0.005) (0.005) (0.006)
Observations 157,652 113,566 85,001
R-squared 0.687 0.654 0.636

Note: The regression in each column contains control variable X and the SAZ boundary dummies. Robust standard errors are in brackets, ***p <
0.01, *p < 0.1.

(ii) Distance limited to 1000 m

(iii) Distance limited to 500 m.

Narrowing the boundary width to 1000 m, the difference in rents decreases from 1.8% to 0.9%. Limiting the sample to housing
within 500 m of the boundary, the difference in the rents for the housing on both sides is not significant. This means that when using
rents as a quality indicator, the quality of the housing and neighborhood within 500 m along the two sides of the SAZ boundary can be
regarded as almost the same. The RD regression coefficient βd RD obtained within this range is the estimated education premium after
controlling for other possible factors such as the quality of the neighborhood.
Next, the DID parallel trend assumption is tested. For resale housing sold at time t, the housing price model is the following:

’y’m6
X X
N X
M
lnPriceit ¼ C þ γ t  treatmenty ⋅ montht þ μn matchn þ ρm boundarym þ λX þ εit ; t ¼ 2014; 2015or2016 (4)
t¼2013m1 n¼1 m¼1

where ρm is the monthly price trend of the two types of housing before the change in SAZs. Treatment indicator treatmentit equals 1 if
housing unit i has been upgraded to a high-quality SAZ and the transaction time t is after the change. During 2014 to 2016, every June
witnessed changes in the SAZs, so equation (4) represents three regression equations. According to the year of the change, we match
changed housing units with the nearby ordinary housing units that transitioned in that change year, and the matched ordinary houses
are used as the control group to compare whether the price-time trends of the two types of housing are consistent. The control variable X
is the same as above. Since the changed sample in academic year 2014 is too small and the monthly time trend is not significant, we only
report the parallel trend test results for the 2015 (left) and 2016 (right) academic years in Fig. 5.

4.1. Benchmark regression results

Table 4 shows the estimated education premium using the OLS, RD, and DID methods.
Columns (2) and (4) show the results without controlling the width of the SAZ boundaries, and columns (3) and (5) show the results
of controlling the width to 500 m. The closer a housing unit is to the city center (measured by the ring roads), the higher the housing
price is. But after limiting the width to 500 m along the boundary, the spatial effect is no longer significant. This shows that including of
the boundary width of 500 m can effectively control other factors affecting the price of housing at the spatial level.
The OLS regression obtained an education premium of 11.6%. If the SAZ boundary is not controlled, the premium would be as high
as 14.8%, but when the sample is limited to housing within 500 m, the RD method shows that the premium is about 10.5%. This in-
dicates that if the characteristics of the neighborhood are not well controlled, it may lead to overestimation of the premium.16
The last two columns in Table 4 report the changes in housing prices obtained by the DID method. The upgrade to a high-quality
school increased housing prices significantly, by about 3.5%, compared with the nearest ordinary housing. Even within 500 m, the
SAZ change leads to a price change of 1.5%. This increase is lower than the average premium of 10.5%. But considering the short time
window, real estate transaction costs, and families’ concerns about the uncertainty of SAZ changes, it is understandable that new SAZs
need time to catch up with the original high-quality SAZs in the price of housing.17
Based on the above analysis, we take the RD method within 500 m of the boundaries as the benchmark model, estimate the premium
for high-quality education year by year, and investigate the variation in the premium. Table 5 shows that the premium for high-quality
SAZs increased from 2014 to 2016, by 8.7%, 10.2%, and 12.3% for academic years 2013, 2014, and 2015, respectively. Table 5 also lists
the 95% confidence intervals of the corresponding coefficients, among which there is no overlap between academic years 2013 and
2015. Based on the price level in January 2013, the SAZ premium was about 3693 yuan/m2 in 2013 and increased to 5640 yuan/m2 in

16
This estimate is close to the results of previous literature; see Zheng et al. (2016). In addition, the impacts of other housing characteristics on the
price of housing are basically reasonable and stable, which is not shown in the table for simplicity.
17
To verify this hypothesis, we further reduced the DID window to half a year before and after the changes in the school districts. We found that the
result of DID without boundaries decreased to 3% during this period, and the result of DID within a 500-m range decreased to 1.1% and was not
significant. This shows that the short-term changes in the new SAZ housing prices are small, and it takes time for the price of housing to rise.

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X. Han et al. China Economic Quarterly International 1 (2021) 29–42

Fig. 5. DID parallel trend test before SAZ change:

Differences in price trends between the changed and controlled groups
Note: The graphs on the left and right correspond to the samples that changed in June 2015 and June 2016, respectively. The monthly trend dif-
ferences and 95% confidence intervals are reported for the differences in the logarithm of housing prices before the change in SAZs.

Table 4
Premium estimation for high-quality primary schools:
The natural logarithm of real housing price as the dependent variable.
OLS RD RD DID DID

All A0 þ A1 A0 þ A1 (500 m) A0 þ A2 A0 þ A2 (500 m)

(1) (2) (3) (4) (5)

High-quality SAZ 0.116*** 0.148*** 0.105*** 0.035*** 0.015 * *

(0.002) (0.003) (0.004) (0.007) (0.007)
Within the 2nd Ring Road 0.133*** 0.169*** 0.004 0.121*** 0.070
(0.007) (0.011) (0.014) (0.009) (0.047)
2nd to 3rd Ring Road 0.059*** 0.068*** 0.013 0.054*** 0.013
(0.005) (0.006) (0.010) (0.006) (0.025)
SAZ boundaries No Yes Yes Yes Yes
SAZ treatment group No No No Yes Yes
Community pairs No No No Yes Yes
Observations 139,904 137,188 67,294 129,612 8040
R-squared 0.766 0.780 0.781 0.754 0.746

Note: The regression in each column contains control variable X. Robust standard errors are in brackets, ***p < 0.01, **p < 0.05.

2015, an increase of more than 50%.18

4.2. Robustness test

The robustness test includes two parts. The first part checks the housing price premium model. In this part, we change the dependent
variable to rents and examine whether the SAZ would lead to significant rent differences after controlling other variables. The second
part takes high-quality SAZ housing as the control group and examines whether the empirical results are consistent.
As shown in Table 6, column (1), the rents in high-quality SAZs are significantly 3.9% higher than the rents for ordinary housing,
which indicates the neighborhood advantage of the high-quality SAZs caused by the sorting effect. And at this time, these two types of

18
The premium value is calculated as follows: Premiumy ¼ ðexpð b
β y Þ  1Þ  Pricey , where y is the academic year.

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X. Han et al. China Economic Quarterly International 1 (2021) 29–42

Table 5
Year-by-year estimation of the premium for high-quality primary schools:
The natural logarithm of real housing price as the dependent variable.
RD RD RD

2013–2014 2014–2015 2015–2016

(1) (2) (3)

High-quality SAZ 0.084*** 0.102*** 0.123***

(0.010) (0.009) (0.007)
95% confidence interval [0.068, 0.105] [0.083, 0.121] [0.110, 0.137]
Observations 8653 14,114 22,043
R-squared 0.719 0.774 0.785

Note: The regression in each column contains control variable Xand the SAZ boundaries. Robust standard errors are in brackets, ***p < 0.01.

housing are not directly comparable. After limiting the sample to 500 m along the boundaries and adopting RD regression, the regression
coefficient of high-quality SAZs is no longer significant. In this case, the two types of housing are comparable. This finding verifies the
conclusion in Table 4 that the estimated premium represents the price effect of buying SAZ housing to obtain high-quality education.
Based on subsamples A0 and A2, the DID regression in the previous section is implemented to investigate changes in the price of
housing in the new high-quality SAZs compared with ordinary SAZs. Here, Table 7, based on the same model, subsamples A1 and A2 are
used to investigate the differences in the prices of housing between new and original quality SAZs. Columns (1) and (2) show that
housing prices in the initial high-quality SAZs are more than 4% higher than those in the new high-quality SAZs, regardless of whether
the sample is limited to housing within 500 m or not. This proves that the new SAZs did not catch up with the housing prices in the initial
SAZs over the short sample period. In addition, column (1) shows that the price of housing in the initial SAZs is 4.6% higher than that in
the newly added SAZs, and the price of housing in the newly added SAZs is about 3.5% higher than that in ordinary SAZs (Table 4). The
sum of these two differences is about 8.1%, which is quite close to the estimated average premium for high-quality education (10.5%)
obtained by the RD method for the sample within 500 m. This finding shows that although it takes some time for the premium in new
SAZs to catch up with the premium in long-recognized SAZs, adding the premiums together shows the trend of convergence. This finding
also provides evidence that indicates that the estimation of the SAZ premium is relatively stable.

5. Conclusion

Based on resale and rental housing transaction records, this paper estimated the premium for high-quality primary education in
housing prices in Beijing and the variation in the premium year by year during the sample period, together with the changes in housing
prices caused by changes in the SAZs.
We find that in the sample with no changes in SAZs, the average annual premium for the 59 high-quality primary schools in Beijing
was about 10.5% during 2013–2016. The premium increased from 8.7% in academic year 2013 to 12.2% in academic year 2015,
corresponding to an increase from 3901 yuan/m2 to 5640 yuan/m.2 Since the average area of housing units in high-quality SAZs is 74
square meters, the education premium in Beijing reached 417,000 yuan in the 2015 academic year (based on the price level in January
2013). In addition, the paper analyzed changes in housing prices caused by changes in the SAZs. The analysis used housing in SAZs that
have changed as the treatment group and the surrounding ordinary housing as the control group. We find that the average housing price
in new SAZs increased significantly by 1.5%–3.5% after the SAZ changes, and the increase remains significant even after limiting the two
groups to housing within 500 m of the SAZ border.
Compared with the existing literature, the contributions of this paper are as the following. First, we collected detailed transaction
records on resale and rental housing in Beijing, together with yearly brochures released by primary schools. In addition to the precise
matching between schools and communities, we obtained information on yearly changes in SAZs. This provided a detailed database that
allowed us to assess the variation in the education premium from year to year and examine the changes in the price of housing caused by
the rezoning of SAZs. We also introduced a novel strategy to control for neighborhood features using the RD method, that is, taking rents
as a comprehensive indicator of housing and neighborhood quality.
The increase in the education premium in Beijing reflects the widening gap in education, which provides a necessary reference for
further policy evaluation and policy making. Simply implementing the rule of nearby enrollment might not achieve the goal of
educational equity; on the contrary, it has led to a higher primary education premium. This may result in a situation in which more and
more high-quality educational resources are provided to richer families.
Furthermore, the changes in the SAZs caused significant but relatively small increases in housing prices, which proves that it takes
time for the real estate market to react to educational resource distribution. In addition to the high transaction cost of real estate, families
tend to hesitate because of uncertainty about the policy after SAZs are adjusted. Therefore, the market reaction should also be taken into
account when considering policy adjustment.

Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to
influence the work reported in this paper.

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X. Han et al. China Economic Quarterly International 1 (2021) 29–42

Table 6
Premium estimation for high-quality primary schools:
The natural logarithm of real housing rents as the dependent variable.
OLS DID DID

ALL A0 þ A2 A0 þ A2 (500 m)

(1) (2) (3)

High-quality SAZ 0.039*** 0.004 0.010

(0.004) (0.011) (0.012)
SAZ boundaries No Yes Yes
SAZ treatment group No Yes Yes
Community pairs No Yes Yes
Observations 157,652 147,338 10,108
R-squared 0.678 0.691 0.633

Note: The regression in each column contains control variable X and the SAZ boundaries. Robust standard errors are in brackets, ***p <
0.01.

Table 7
Premium estimation for high-quality primary schools:
The natural logarithm of real housing prices as the dependent variable.
DID DID

A1 þ A2 A1 þ A2 (500 m)

(1) (2)

High-quality SAZ 0.046*** 0.042***

(0.006) (0.007)
SAZ treatment group 0.035*** 0.049***
(0.007) (0.009)
Observations 12,304 4403
R-squared 0.768 0.801

Note: The regression in each column contains control variable X, SAZ boundaries, and community
pairs. Robust standard errors are in brackets, ***p < 0.01.

Acknowledgments

This project was supported by the National Science Fund for Young Scholars of China (Grant No. 71603011), the Capital Circulation
Research Base, China (Grant No. JD-YB-2020-004), and Reseaerch Project on New Economy (Grant No. 7310100196). We thank
seminar and conference participants at the CCER Summer Institute (2017), CES North America Conference (2018), China Economics
Annual Conference (2018), Shanghai Jiaotong University, and University of Oslo for helpful comments. We are responsible for all
remaining errors.

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