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Ethnic diversity and neighborhood house prices

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  • 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
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    Cited by:

    1. Ioannides, Yannis M., 2015. "Neighborhoods to nations via social interactions," Economic Modelling, Elsevier, vol. 48(C), pages 5-15.
    2. repec:aea:jeclit:v:55:y:2017:i:2:p:609-20 is not listed on IDEAS
    3. Brunner, Beatrice & Kuhn, Andreas, 2014. "Immigration, Cultural Distance and Natives' Attitudes Towards Immigrants: Evidence from Swiss Voting Results," IZA Discussion Papers 8409, Institute for the Study of Labor (IZA).

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    Keywords

    Ethnic diversity; Housing; Neighborhood choice;

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