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Superstar Cities

  • Joseph Gyourko
  • Christopher Mayer
  • Todd Sinai

We document large long-run differences in average house price appreciation across metropolitan areas over the past 50 years, and show they can be explained by an inelastic supply of land in some unique locations combined with an increasing number of highincome households nationally. The resulting high house prices and price-to-rent ratios in those "superstar" areas crowd out lower income households. The same forces generate a similar pattern among municipalities within a metropolitan area. These facts suggest that disparate local house price and income trends can be driven by aggregate demand, not just changes in local factors such as productivity or amenities.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.5.4.167
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File URL: http://www.aeaweb.org/aej/pol/data/2012-0082_data.zip
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File URL: http://www.aeaweb.org/aej/pol/ds/november2013/2012-0082_ds.zip
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Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 5 (2013)
Issue (Month): 4 (November)
Pages: 167-99

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Handle: RePEc:aea:aejpol:v:5:y:2013:i:4:p:167-99
Note: DOI: 10.1257/pol.5.4.167
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  1. Waldfogel, Joel, 2003. " Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated-Product Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 557-68, Autumn.
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  8. Ortalo-Magné, François & Rady, Sven, 2005. "Heterogeneity within Communities: A Stochastic Model with Tenure Choice," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 49, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  9. Edward L. Glaeser & Joseph Gyourko, 2005. "Urban Decline and Durable Housing," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 345-375, April.
  10. Blomquist, Glenn C & Berger, Mark C & Hoehn, John P, 1988. "New Estimates of Quality of Life in Urban Areas," American Economic Review, American Economic Association, vol. 78(1), pages 89-107, March.
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  19. repec:hoo:wpaper:e-95-4 is not listed on IDEAS
  20. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
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  28. Joseph Gyourko & Albert Saiz & Anita Summers, 2008. "A New Measure of the Local Regulatory Environment for Housing Markets: The Wharton Residential Land Use Regulatory Index," Urban Studies, Urban Studies Journal Limited, vol. 45(3), pages 693-729, March.
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