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A Dynamic Model of Demand for Houses and Neighborhoods

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  • Patrick Bayer
  • Robert McMillan
  • Alvin Murphy
  • Christopher Timmins
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    Abstract

    We develop a tractable model of neighborhood choice in a dynamic setting along with a computationally straightforward estimation approach. This approach uses information about neighborhood choices and the timing of moves to recover moving costs and preferences for dynamically-evolving housing and neighborhood attributes. The model and estimator are potentially applicable to the study of a wide range of dynamic phenomena in housing markets and cities. We focus here on estimating the marginal willingness to pay for non-marketed amenities – neighborhood racial composition, air pollution, and violent crime – using rich dynamic data. Consistent with the time-series properties of each amenity, we find that a static demand model understates willingness to pay to avoid pollution and crime but overstates willingness to pay to live near neighbors of one’s own race. These findings have important implications for the class of static housing demand models typically used to value urban amenities.

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    Bibliographic Info

    Paper provided by Duke University, Department of Economics in its series Working Papers with number 11-16.

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    Length: 44
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:duk:dukeec:11-16

    Contact details of provider:
    Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
    Phone: (919) 660-1800
    Fax: (919) 684-8974
    Web page: http://econ.duke.edu/

    Related research

    Keywords: Neighborhood Choice; Housing Demand; Hedonic Valuation; Dynamic Discrete Choice;

    This paper has been announced in the following NEP Reports:

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    Cited by:
    1. Gregorio Caetano & Vikram Maheshri, 2013. "School Segregation and the Identification of Tipping Behavior," Working Papers 2013-252-50, Department of Economics, University of Houston.
    2. Kevin Haninger & Lala Ma & Christopher Timmins, 2014. "The Value of Brownfield Remediation," NBER Working Papers 20296, National Bureau of Economic Research, Inc.
    3. Muehlenbachs, Lucija & Spiller, Elisheba & Timmins, Christopher, . "The Housing Market Impacts of Shale Gas Development," Discussion Papers dp-13-39-rev, Resources For the Future.
    4. Stephen Coate, 2013. "Evaluating Durable Public Good Provision using Housing Prices," NBER Working Papers 18767, National Bureau of Economic Research, Inc.
    5. Brooks M. Depro & Christopher Timmins & Maggie O'Neil, 2012. "Meeting Urban Housing Needs: Do People Really Come to the Nuisance?," NBER Working Papers 18109, National Bureau of Economic Research, Inc.

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