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Prices of Peers: Identifying Endogenous Price Effects in the Housing Market

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  • Nikodem Szumilo

Abstract

The paper identifies neighbourhood price spillovers in the housing market. Although this concept has attracted some theoretical research and is strongly supported by practitioners, it has proven very difficult to show in empirical data. By using the linear-in-means model, which is routinely applied to identify endogenous effects in groups of peers, the study summarises all threats to identification and demonstrates how they can be addressed by exploiting information asymmetry between buyers of different houses and delays in revealing transaction prices. The results show that a 1% increase in the price of a house increases the house price of its neighbour by up to 0.3%.

Suggested Citation

  • Nikodem Szumilo, 2021. "Prices of Peers: Identifying Endogenous Price Effects in the Housing Market," The Economic Journal, Royal Economic Society, vol. 131(639), pages 3041-3070.
    • Handle: RePEc:oup:econjl:v:131:y:2021:i:639:p:3041-3070.
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    File URL: http://hdl.handle.net/10.1093/ej/ueaa129
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    Cited by:

    1. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    2. Nicolás Durán & J. Paul Elhorst, 2023. "Induced earthquakes and house prices: the role of spatiotemporal and global effects," Journal of Geographical Systems, Springer, vol. 25(2), pages 157-183, April.

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