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Do Urban Neighborhoods Benefit from Homeowners? Evidence from Housing Prices

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  • Mika Kortelainen
  • Tuukka Saarimaa

Abstract

Homeownership is heavily subsidized in most countries. The adverse effects of this policy on economic efficiency and income distribution are well documented in the economics literature. The main argument in favor of subsidizing homeownership is that it creates positive externalities that offset these adverse effects. In this paper, we test whether homeowners create positive externalities that capitalize into housing prices in multi-storey buildings. Using semi-parametric hedonic regressions with and without instrumental variables, we find no evidence of positive externalities, although the results with instrumental variables are somewhat imprecise. This result is robust to several sensitivity checks and to a relaxation of the identification assumptions of our instrument using set identification.

Suggested Citation

  • Mika Kortelainen & Tuukka Saarimaa, 2015. "Do Urban Neighborhoods Benefit from Homeowners? Evidence from Housing Prices," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(1), pages 28-56, January.
    • Handle: RePEc:bla:scandj:v:117:y:2015:i:1:p:28-56
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    File URL: http://hdl.handle.net/10.1111/sjoe.12090
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    Cited by:

    1. Gabriel M. Ahlfeldt & Wolfgang Maennig, 2019. "Gewinner und Verlierer von Stadtentwicklung: Ein Plädoyer für mehr Wohneigentum [Winners and losers of urban development: A plea for more home ownership]," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 5(1), pages 111-130, November.
    2. John Gibson & Bonggeun Kim, 2018. "Home Ownership and Political Participation: Longitudinal Evidence Suggests There is No Causal Relationship," Working Papers in Economics 18/02, University of Waikato.

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