Making—or Picking—Winners: Evidence of Internal and External Price Effects in Historic Preservation Policies
AbstractMuch has been written identifying property price effects of historic preservation policies. Little attention has been paid to the possible policy endogeneity in hedonic price models. This paper outlines a general case of land use regulation in the presence of externalities and then demonstrates the usefulness of the model in an instrumental-variables estimation of a hedonic price analysis â with an application to historic preservation in Chicago. The theoretical model casts doubt on previous results concerning price effects of preservation policies. The comparative statics identify some determinants of regulation that seem, on the face of it, most unlikely to also belong in a hedonic price equation. The analysis employs these determinants as instruments for endogenous regulatory treatment in a hedonic price analysis. OLS estimation of the hedonic offers results consistent with much of previous literature, namely that property values are higher for historic landmarks. In the 2SLS hedonic, robust estimates of the "own" price effect of historic designation are shown to be large and negative (approx. -27%) for homes in landmark districts. Further, significant and substantively important (positive) external price effects of landmark designations are found. The paper concludes with a discussion of the policy implications of these findings for historic preservation.
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Bibliographic InfoArticle provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.
Volume (Year): 39 (2011)
Issue (Month): 2 (06)
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Other versions of this item:
- Noonan, Douglas S. & Krupka, Douglas J., 2009. "Making – or Picking – Winners: Evidence of Internal and External Price Effects in Historic Preservation Policies," IZA Discussion Papers 4110, Institute for the Study of Labor (IZA).
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Housing Supply and Markets
- R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
- Z1 - Other Special Topics - - Cultural Economics
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Noonan, Douglas S. & Krupka, Douglas J., 2008.
"Determinants of Historic and Cultural Landmark Designation: Why We Preserve What We Preserve,"
IZA Discussion Papers
3777, Institute for the Study of Labor (IZA).
- Douglas Noonan & Douglas Krupka, 2010. "Determinants of historic and cultural landmark designation: why we preserve what we preserve," Journal of Cultural Economics, Springer, vol. 34(1), pages 1-26, February.
- James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
- N. Edward Coulson & Michael L. Lahr, 2005. "Gracing the Land of Elvis and Beale Street: Historic Designation and Property Values in Memphis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 33(3), pages 487-507, 09.
- Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
- Coulson, N Edward & Leichenko, Robin M, 2001. "The Internal and External Impact of Historical Designation on Property Values," The Journal of Real Estate Finance and Economics, Springer, vol. 23(1), pages 113-24, July.
- Rainer Schulz & Martin Wersing, 2012. "A Slab in the Face: Building Quality and Neighborhood Effects," SFB 649 Discussion Papers SFB649DP2012-020, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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