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The Neighbor is King: Customer Discrimination in the Housing Market

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Abstract

This paper provides a method to single out customer-based discrimination in the housing market. We build a matching model with ethnic externalities where landlords differ in the number of housing units they own within the same building. Multiple-dwelling landlords discriminate more often than single-dwelling landlords only if some tenants are prejudiced against the minority group. By testing the null hypothesis whereby minority tenants are equally likely to have a multiple-dwelling landlord, we can test whether there is customer discrimination or not. We run the test on French data and show evidence of customer discrimination in the rental market.

Suggested Citation

  • Pierre-Philippe Combes & Bruno Decreuse & Benoît Schmutz & Alain Trannoy, 2012. "The Neighbor is King: Customer Discrimination in the Housing Market," AMSE Working Papers 1224, Aix-Marseille School of Economics, Marseille, France.
  • Handle: RePEc:aim:wpaimx:1224
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    References listed on IDEAS

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    1. Zenou,Yves, 2009. "Urban Labor Economics," Cambridge Books, Cambridge University Press, number 9780521875387, April.
    2. Kevin Lang, 2007. "Introduction to Poverty and Discrimination," Introductory Chapters,in: Poverty and Discrimination Princeton University Press.
    3. David Card & Alexandre Mas & Jesse Rothstein, 2008. "Tipping and the Dynamics of Segregation," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 177-218.
    4. Bruno Decreuse & Benoît Schmutz, 2012. "Residential Mobility and Unemployment of African Immigrants in France: A Calibration Approach," Annals of Economics and Statistics, GENES, issue 107-108, pages 51-91.
    5. 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.
    6. Zhao, Bo & Ondrich, Jan & Yinger, John, 2006. "Why do real estate brokers continue to discriminate? Evidence from the 2000 Housing Discrimination Study," Journal of Urban Economics, Elsevier, vol. 59(3), pages 394-419, May.
    7. 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.
    8. Gabriel Desgranges & Étienne Wasmer, 2000. "Appariements sur le marché du logement," Annals of Economics and Statistics, GENES, issue 58, pages 253-287.
    9. Hellerstein, Judith K. & Neumark, David & McInerney, Melissa, 2008. "Spatial mismatch or racial mismatch?," Journal of Urban Economics, Elsevier, vol. 64(2), pages 464-479, September.
    10. Zenou,Yves, 2009. "Urban Labor Economics," Cambridge Books, Cambridge University Press, number 9780521875387, March.
    11. Hanson, Andrew & Hawley, Zackary, 2011. "Do landlords discriminate in the rental housing market? Evidence from an internet field experiment in US cities," Journal of Urban Economics, Elsevier, vol. 70(2-3), pages 99-114, September.
    12. Romain Aeberhardt & Denis Fougère & Julien Pouget & Roland Rathelot, 2010. "Wages and employment of French workers with African origin," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(3), pages 881-905, June.
    13. Ahmed, Ali M. & Hammarstedt, Mats, 2008. "Discrimination in the rental housing market: A field experiment on the Internet," Journal of Urban Economics, Elsevier, vol. 64(2), pages 362-372, September.
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    22. Gary A. Dymski, 2006. "Discrimination in the Credit and Housing Markets: Findings and Challenges," Chapters,in: Handbook on the Economics of Discrimination, chapter 8 Edward Elgar Publishing.
    23. Kerwin Kofi Charles & Jonathan Guryan, 2008. "Prejudice and Wages: An Empirical Assessment of Becker's The Economics of Discrimination," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 773-809, October.
    24. Stephen L. Ross, 2008. "Understanding Racial Segregation: What is known about the Effect of Housing Discrimination," Working papers 2008-15, University of Connecticut, Department of Economics, revised Nov 2008.
    25. Ondrich, Jan & Stricker, Alex & Yinger, John, 1999. "Do Landlords Discriminate? The Incidence and Causes of Racial Discrimination in Rental Housing Markets," Journal of Housing Economics, Elsevier, vol. 8(3), pages 185-204, September.
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    Citations

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    Cited by:

    1. Laurent Gobillon & Matthieu Solignac, 2015. "Homeownership of immigrants in France: selection effects related to international migration flows," PSE Working Papers halshs-01233069, HAL.
    2. Pierre-Philippe Combes & Bruno Decreuse & Morgane Laouénan & Alain Trannoy, 2016. "Customer Discrimination and Employment Outcomes: Theory and Evidence from the French Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 34(1), pages 107-160.
    3. Yann Algan & Camille Hémet & David D. Laitin, 2016. "The Social Effects of Ethnic Diversity at the Local Level: A Natural Experiment with Exogenous Residential Allocation," Journal of Political Economy, University of Chicago Press, vol. 124(3), pages 696-733.
    4. Algan, Yann & Hémet, Camille & Laitin, David D., 2011. "Diversity and Public Goods: A Natural Experiment with Exogenous Residential Allocation," IZA Discussion Papers 6053, Institute for the Study of Labor (IZA).
    5. Laurent Gobillon & Matthieu Solignac, 2014. "Homeownership of immigrants in France," ERSA conference papers ersa14p558, European Regional Science Association.
    6. Auspurg, Katrin & Hinz, Thomas & Schmid, Laura, 2017. "Contexts and conditions of ethnic discrimination: Evidence from a field experiment in a German housing market," Journal of Housing Economics, Elsevier, vol. 35(C), pages 26-36.
    7. Yann Algan & Camille Hémet & David Laitin, 2012. "The Social Effects of Ethnic Diversity at the Local Level," Working Papers hal-01171148, HAL.
    8. Yann Algan & Camille Hémet & David D. Laitin, 2016. "The Social Effects of Ethnic Diversity at the Local Level: A Natural Experiment with Exogenous Residential Allocation," Journal of Political Economy, University of Chicago Press, vol. 124(3), pages 696-733.

    More about this item

    Keywords

    Customer Discrimination; Matching frictions; Neighborhood Externalities; Housing Market.;

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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