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On the role of public price information in housing markets

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Author Info

  • Essi Eerola
  • Teemu Lyytikäinen

Abstract

This paper studies the impact of increased price information on the functioning of the housing market. We first study the implications of new information for market outcomes in a theoretical framework so as to disentangle the potential channels through which information may be important. The results suggest that increased information leads to higher prices. The time on the market, in turn, may become longer or shorter depending on which side of the market reacts more to the new information. In the empirical part of the paper, we utilize a Finnish policy intervention to estimate these effects. In July 2007, a website with detailed information about individual housing transactions was opened. The website covered only part of the country, which allows us to use the Differences-in-Differences method to estimate the effect of increased information. The results show that increased information on past transactions led to higher prices and shorter times on the market. In the light of our theoretical results, the empirical evidence therefore indicates that buyers react more to the new information than the sellers.

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Bibliographic Info

Paper provided by Government Institute for Economic Research Finland (VATT) in its series Working Papers with number 30.

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Date of creation: 23 Apr 2012
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Handle: RePEc:fer:wpaper:30

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Related research

Keywords: Housing prices; time on the market; information; learning; differences-in-differences;

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References

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  1. Teemu Lyytikäinen & Torsten Santavirta, 2010. "The effect of church tax on church membership," Working Papers 20, Government Institute for Economic Research Finland (VATT).
  2. Tuomas Kosonen, 2013. "To Work or not to Work? The Effect of Child-Care Subsidies on the Labour Supply of Parents," CESifo Working Paper Series 4065, CESifo Group Munich.
  3. Ilja Kristian Kavonius, 2010. "Fiscal policies in Europe and the United States during the Great Depression," Working Papers 13, Government Institute for Economic Research Finland (VATT).
  4. Heléne Lundqvist, 2010. "Granting public or private consumption? Effects of grants on local public spending and income taxes," Working Papers 15, Government Institute for Economic Research Finland (VATT).
  5. Huttunen, Kristiina & Kellokumpu, Jenni, 2012. "The Effect of Job Displacement on Couples' Fertility Decisions," IZA Discussion Papers 6707, Institute for the Study of Labor (IZA).
  6. Rokkanen, Miikka & Uusitalo, Roope, 2010. "Changes in Job Stability: Evidence from Lifetime Job Histories," IZA Discussion Papers 4721, Institute for the Study of Labor (IZA).
  7. Olli Ropponen, 2011. "Reconciling the evidence of Card and Krueger (1994) and Neumark and Wascher (2000)," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(6), pages 1051-1057, 09.
  8. Tuomas Kosonen, 2010. "What was actually cut in the barbers' VAT cut?," Working Papers 18, Government Institute for Economic Research Finland (VATT).
  9. Olli Ropponen, 2011. "A Note on the Robustness of Card and Krueger (1994) and Neumark and Wascher (2000)," Working Papers 25, Government Institute for Economic Research Finland (VATT).
  10. Tomi Kyyrä & Ralf A. Wilke, 2011. "On the reliability of retrospective unemployment information in European household panel data," Working Papers 21, Government Institute for Economic Research Finland (VATT).
  11. Seppo Kari & Jarkko Harju, 2011. "Dividend taxes and decisions of MNEs: Evidence from a Finnish tax reform," Working Papers 27, Government Institute for Economic Research Finland (VATT).
  12. Kimmo Ollikka & Piia Aatola & Markku Ollikainen, 2012. "Informational Efficiency of the EU ETS market ? a study of price predictability and profitable trading," Working Papers 28, Government Institute for Economic Research Finland (VATT).
  13. Janne Tukiainen & Tuukka Saarimaa, 2010. "Coalition formation and political decision making: Evidence from Finnish municipal mergers," Working Papers 19, Government Institute for Economic Research Finland (VATT).
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Citations

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Cited by:
  1. Eerola, Essi & Määttänen, Niku, 2013. "Matching in the housing market with risk aversion and savings," ETLA Working Papers 3, The Research Institute of the Finnish Economy.

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