Neighborhood Effects and Housing Demand
AbstractIn this paper, we estimate a model of housing demand with neighbourhood effects. We exploit special features of the national sample of the American Housing Survey and properties of housing markets that allow us to create 'natural' instruments and therefore identify the impact of social interactions. We find evidence of both endogenous and contextual neighbourhood effects. We report two alternative sets of estimates for neighbourhood effects that differ in terms of the instruments we use for estimating the model. When the endogenous neighbourhood effect is large the respective contextual effects are weak, and vice versa. The elasticity of housing demand with respect to the mean of the neighbours' housing demands (the endogenous effect) ranges from 0.19 to 0.66 and is generally very significant. The contextual effects are also very significant. A key such effect, the elasticity with respect to the mean of neighbours' permanent incomes, ranges from 0.17 to 0.54. Copyright Â© 2003 John Wiley & Sons, Ltd.
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Bibliographic InfoPaper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0012.
Date of creation: 2000
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Other versions of this item:
- NEP-ALL-2004-08-31 (All new papers)
- NEP-EVO-2000-05-30 (Evolutionary Economics)
- NEP-URE-2004-08-31 (Urban & Real Estate Economics)
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