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We use house price hedonics to compare the extent that homeowners value traditional measures of school quality or the ''value added'' of schooling. Unlike other studies, we use spatial statistics as an identification strategy. Based on our study of 310 school districts and 77,000 house transactions, we find little support for the value added model. Instead, we find that households consistently value a district's average proficiency test scores and expenditures. The elasticity of house prices with respect to school expenditures is 0.49, and an increase in test scores by one standard deviation, ceteris paribus, raises house prices by 7.1 percent.

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Municipalities sometimes retain separate police departments and park services while cooperating in public schooling services with neighboring municipalities. The theoretical model of Ellingsen (Journal of Public Economics, 68, 251–68, 1998) predicts that: (1) under Tiebout sorting, larger size differences make big municipalities more likely to consolidate with small ones, but small municipalities less likely to consolidate with big ones; (2) municipalities never excessively consolidate. The current study examines 298 pairs of municipalities that could consolidate schooling. The decision‐making process of the larger and smaller member of each pair is examined separately. The Poirier bivariate probit results are consistent with Ellingsen's predictions but contradict previous empirical findings.