IDEAS home Printed from https://ideas.repec.org/a/eee/regeco/v48y2014icp21-38.html
   My bibliography  Save this article

Ethnic diversity and neighborhood house prices

Author

Listed:
  • Li, Qiang

Abstract

In recent decades, the large influx of immigrants to the U.S. and other developed countries has made cities in these countries more ethnically diverse. In this paper, I aim to understand whether and how ethnic diversity affects communities in these cities. A general equilibrium model is built in which people of many ethnic groups interact in the housing market through both price signals and non-market mechanisms. An endogenous correlation between neighborhood house price and the Herfindahl index of ethnic concentration arises because of social interactions. After addressing the endogeneity issue, I find that neighborhoods with more homogeneous minority populations command higher prices using a dataset of housing transactions and neighborhood socio-economic characteristics in Vancouver, Canada. This and other findings support the notion that non-market social interactions influence people's preference and behavior.

Suggested Citation

  • Li, Qiang, 2014. "Ethnic diversity and neighborhood house prices," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 21-38.
  • Handle: RePEc:eee:regeco:v:48:y:2014:i:c:p:21-38
    DOI: 10.1016/j.regsciurbeco.2014.04.007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0166046214000428
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.regsciurbeco.2014.04.007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zenou, Yves, 2013. "Spatial versus social mismatch," Journal of Urban Economics, Elsevier, vol. 74(C), pages 113-132.
    2. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation of Elementary Education," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 577-599.
    3. Patrick Bayer & Christopher Timmins, 2007. "Estimating Equilibrium Models Of Sorting Across Locations," Economic Journal, Royal Economic Society, vol. 117(518), pages 353-374, March.
    4. David Marmaros & Bruce Sacerdote, 2006. "How Do Friendships Form?," The Quarterly Journal of Economics, Oxford University Press, vol. 121(1), pages 79-119.
    5. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 588-638, August.
    6. Takahiro Miyao, 1978. "A Probabilistic Model of Location Choice with Neighborhood Effects," Working Paper 303, Economics Department, Queen's University.
    7. Dhar, Paramita & Ross, Stephen L, 2012. "School district quality and property values: Examining differences along school district boundaries," Journal of Urban Economics, Elsevier, vol. 71(1), pages 18-25.
    8. Vigdor, Jacob L., 2002. "Interpreting ethnic fragmentation effects," Economics Letters, Elsevier, vol. 75(2), pages 271-276, April.
    9. O'Sullivan, Arthur, 2009. "Schelling's model revisited: Residential sorting with competitive bidding for land," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 397-408, July.
    10. Rose-Ackerman, Susan, 1975. "Racism and urban structure," Journal of Urban Economics, Elsevier, vol. 2(1), pages 85-103, January.
    11. Sergio Currarini & Matthew O. Jackson & Paolo Pin, 2009. "An Economic Model of Friendship: Homophily, Minorities, and Segregation," Econometrica, Econometric Society, vol. 77(4), pages 1003-1045, July.
    12. William Clark, 1992. "Residential preferences and residential choices in a multiethnic context," Demography, Springer;Population Association of America (PAA), vol. 29(3), pages 451-466, August.
    13. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    14. Maisy Wong, 2013. "Estimating Ethnic Preferences Using Ethnic Housing Quotas in Singapore," Review of Economic Studies, Oxford University Press, vol. 80(3), pages 1178-1214.
    15. King, A Thomas & Mieszkowski, Peter, 1973. "Racial Discrimination, Segregation, and the Price of Housing," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 590-606, May-June.
    16. Anas, Alex, 1988. "Agglomeration and taste heterogeneity : Equilibria, stability, welfare and dynamics," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 7-35, February.
    17. Ben Dachis & Gilles Duranton & Matthew A. Turner, 2012. "The effects of land transfer taxes on real estate markets: evidence from a natural experiment in Toronto," Journal of Economic Geography, Oxford University Press, vol. 12(2), pages 327-354, March.
    18. Patrick Bajari & Matthew E. Kahn, 2005. "Estimating Housing Demand With an Application to Explaining Racial Segregation in Cities," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 20-33, January.
    19. John Yinger, 1978. "The Black-White Price Differential in Housing: Some Further Evidence," Land Economics, University of Wisconsin Press, vol. 54(2), pages 187-206.
    20. David M. Cutler & Edward L. Glaeser & Jacob L. Vigdor, 1999. "The Rise and Decline of the American Ghetto," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 455-506, June.
    21. Ruth Miquel, 2003. "Identification of Effects of Dynamic Treatments with a Difference-in-Differences Approach," University of St. Gallen Department of Economics working paper series 2003 2003-06, Department of Economics, University of St. Gallen.
    22. Clapp, John M. & Nanda, Anupam & Ross, Stephen L., 2008. "Which school attributes matter? The influence of school district performance and demographic composition on property values," Journal of Urban Economics, Elsevier, vol. 63(2), pages 451-466, March.
    23. Macpherson, David A & Sirmans, G Stacy, 2001. "Neighborhood Diversity and House-Price Appreciation," The Journal of Real Estate Finance and Economics, Springer, vol. 22(1), pages 81-97, January.
    24. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    25. Papageorgiou, Y. Y., 1982. "A probabilistic model of location choice with neighborhood effects: Comment," Journal of Economic Theory, Elsevier, vol. 27(1), pages 229-230, June.
    26. Coulson, N Edward & Bond, Eric W, 1990. "A Hedonic Approach to Residential Succession," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 433-444, August.
    27. Patrick Bayer & Robert McMillan & Kim Rueben, 2004. "An Equilibrium Model of Sorting in an Urban Housing Market," NBER Working Papers 10865, National Bureau of Economic Research, Inc.
    28. Albert Saiz & Susan Wachter, 2011. "Immigration and the Neighborhood," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 169-188, May.
    29. Patacchini, Eleonora & Zenou, Yves, 2012. "Ethnic networks and employment outcomes," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 938-949.
    30. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    31. Alberto Alesina & Eliana La Ferrara, 2003. "Ethnic Diversity and Economic Performance," Harvard Institute of Economic Research Working Papers 2028, Harvard - Institute of Economic Research.
    32. Junfu Zhang, 2011. "Tipping And Residential Segregation: A Unified Schelling Model," Journal of Regional Science, Wiley Blackwell, vol. 51(1), pages 167-193, February.
    33. Schelling, Thomas C, 1969. "Models of Segregation," American Economic Review, American Economic Association, vol. 59(2), pages 488-493, May.
    34. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, vol. 66(5), pages 1017-1098, September.
    35. Miyao, Takahiro, 1978. "A probabilistic model of location choice with neighborhood effects," Journal of Economic Theory, Elsevier, vol. 19(2), pages 347-358, December.
    36. Kiel, Katherine A. & Zabel, Jeffrey E., 1996. "House Price Differentials in U.S. Cities: Household and Neighborhood Racial Effects," Journal of Housing Economics, Elsevier, vol. 5(2), pages 143-165, June.
    37. Bayer, Patrick & Timmins, Christopher, 2005. "On the equilibrium properties of locational sorting models," Journal of Urban Economics, Elsevier, vol. 57(3), pages 462-477, May.
    38. Yinger, John, 1976. "Racial prejudice and racial residential segregation in an urban model," Journal of Urban Economics, Elsevier, vol. 3(4), pages 383-396, October.
    39. Shihe Fu, 2005. "What Has Been Capitalized into Property Values: Human Capital, Social Capital, or Cultural Capital?," Working Papers 05-25, Center for Economic Studies, U.S. Census Bureau.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brunner, Beatrice & Kuhn, Andreas, 2014. "Immigration, Cultural Distance and Natives' Attitudes Towards Immigrants: Evidence from Swiss Voting Results," IZA Discussion Papers 8409, Institute of Labor Economics (IZA).
    2. Ioannides, Yannis M., 2015. "Neighborhoods to nations via social interactions," Economic Modelling, Elsevier, vol. 48(C), pages 5-15.
    3. Bonakdar, Said Benjamin & Roos, Michael W. M., 2021. "Dissimilarity effects on house prices: What is the value of similar neighbours?," Ruhr Economic Papers 894, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. Yannis M. Ioannides, 2017. "Review of Climbing Mount Laurel: The Struggle for Affordable Housing and Social Mobility in an American Suburb by Douglas S. Massey et al," Journal of Economic Literature, American Economic Association, vol. 55(2), pages 609-620, June.
    5. Balkan, Binnur & Tok, Elif Ozcan & Torun, Huzeyfe & Tumen, Semih, 2018. "Immigration, Housing Rents, and Residential Segregation: Evidence from Syrian Refugees in Turkey," IZA Discussion Papers 11611, Institute of Labor Economics (IZA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nicolai V. Kuminoff & V. Kerry Smith & Christopher Timmins, 2010. "The New Economics of Equilibrium Sorting and its Transformational Role for Policy Evaluation," NBER Working Papers 16349, National Bureau of Economic Research, Inc.
    2. Albert Saiz & Susan Wachter, 2011. "Immigration and the Neighborhood," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 169-188, May.
    3. John Yinger, 2009. "Hedonic Markets and Explicit Demands: Bid-Function Envelopes for Public Services, Neighborhood Amenities, and Commuting Costs," Center for Policy Research Working Papers 114, Center for Policy Research, Maxwell School, Syracuse University.
    4. Caetano, Gregorio & Maheshri, Vikram, 2017. "School segregation and the identification of tipping behavior," Journal of Public Economics, Elsevier, vol. 148(C), pages 115-135.
    5. Patrick Bayer & Robert McMillan & Kim Rueben, 2004. "Residential Segregation in General Equilibrium," Working Papers 885, Economic Growth Center, Yale University.
    6. Andrea Baranzini & Caroline Schaerer & José V. Ramirez & Philippe Thalmann, 2008. "Do Foreigners Pay Higher Rents for the Same Quality of Housing in Geneva and Zurich?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 144(IV), pages 703-730, December.
    7. Florent Dubois & Christophe Muller, 2017. "Segregation and the Perception of the Minority," Working Papers halshs-01520308, HAL.
    8. Zhang, Junfu & Zheng, Liang, 2015. "Are people willing to pay for less segregation? Evidence from U.S. internal migration," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 97-112.
    9. Nicolai V. Kuminoff & V. Kerry Smith & Christopher Timmins, 2013. "The New Economics of Equilibrium Sorting and Policy Evaluation Using Housing Markets," Journal of Economic Literature, American Economic Association, vol. 51(4), pages 1007-1062, December.
    10. Yinger, John, 2015. "Hedonic markets and sorting equilibria: Bid-function envelopes for public services and neighborhood amenities," Journal of Urban Economics, Elsevier, vol. 86(C), pages 9-25.
    11. Gautier, Pieter A. & Siegmann, Arjen & Van Vuuren, Aico, 2009. "Terrorism and attitudes towards minorities: The effect of the Theo van Gogh murder on house prices in Amsterdam," Journal of Urban Economics, Elsevier, vol. 65(2), pages 113-126, March.
    12. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 588-638, August.
    13. Cobb-Clark, Deborah A. & Sinning, Mathias G., 2011. "Neighborhood diversity and the appreciation of native- and immigrant-owned homes," Regional Science and Urban Economics, Elsevier, vol. 41(3), pages 214-226, May.
    14. Xiaozhou Ding & Christopher Bollinger & Michael Clark & William H. Hoyt, 2020. "How Do School District Boundary Changes and New School Proposals Affect Housing Prices," CESifo Working Paper Series 8069, CESifo.
    15. Yannis M. Ioannides, 2010. "Neighborhood Effects and Housing," Discussion Papers Series, Department of Economics, Tufts University 0747, Department of Economics, Tufts University.
    16. Stadelmann, David, 2010. "Which factors capitalize into house prices? A Bayesian averaging approach," Journal of Housing Economics, Elsevier, vol. 19(3), pages 180-204, September.
    17. Chung, Il Hwan, 2015. "School choice, housing prices, and residential sorting: Empirical evidence from inter-and intra-district choice," Regional Science and Urban Economics, Elsevier, vol. 52(C), pages 39-49.
    18. David C. Maré & Andrew Coleman, 2011. "Estimating the determinants of population location in Auckland," Working Papers 11_07, Motu Economic and Public Policy Research.
    19. Patacchini, Eleonora & Zenou, Yves, 2012. "Ethnic networks and employment outcomes," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 938-949.
    20. Patrick Bayer & Robert McMillan, 2005. "Racial Sorting and Neighborhood Quality," NBER Working Papers 11813, National Bureau of Economic Research, Inc.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:regeco:v:48:y:2014:i:c:p:21-38. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/regec .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/regec .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.