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Construction of a Spatial Housing Price Index by Estimating an Almost Ideal Demand System

Author

Listed:
  • Víctor Iturra

    () (IDEAR - Department of Economics, Universidad Católica del Norte - Chile)

  • Dusan Paredes

    () (IDEAR - Department of Economics, Universidad Católica del Norte - Chile)

Abstract

The aim of this article is to build a spatial housing price index for the Chilean communes (the commune political body similar to a municipality or county). The first step is to recover hedonic prices of three housing attributes by estimating a mixed index model (Bowden, 1992) using a generalized method of moments procedure. Secondly, a censored almost ideal demand system (Deaton and Muellbauer, 1980) is estimated to build expenditures for every commune and to compare them among different spatial units, while maintaining a constant utility level. Using micro data from the 2009 CASEN survey, we show that there are important differences in housing prices among Chilean communes and the axiomatic approach tends to understate spatial index compared to economic approach.

Suggested Citation

  • Víctor Iturra & Dusan Paredes, 2011. "Construction of a Spatial Housing Price Index by Estimating an Almost Ideal Demand System," Documentos de Trabajo en Economia y Ciencia Regional 11, Universidad Catolica del Norte, Chile, Department of Economics, revised May 2011.
  • Handle: RePEc:cat:dtecon:dt201101
    as

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    File URL: https://sites.google.com/a/ucn.cl/wpeconomia/archivos/WP2011-01.pdf
    File Function: First version, 2011
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    References listed on IDEAS

    as
    1. Brasington, David M. & Hite, Diane, 2008. "A mixed index approach to identifying hedonic price models," Regional Science and Urban Economics, Elsevier, vol. 38(3), pages 271-284, May.
    2. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2008. "Spatial wage disparities: Sorting matters!," Journal of Urban Economics, Elsevier, vol. 63(2), pages 723-742, March.
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    Cited by:

    1. Dusan Paredes & Víctor Iturra, 2011. "Substitution Bias and the Construction of a Spatial Cost of Living Index," Documentos de Trabajo en Economia y Ciencia Regional 13, Universidad Catolica del Norte, Chile, Department of Economics, revised May 2011.

    More about this item

    Keywords

    Spatial housing price index; Mixed index; Demand system with censored data; Economic approach;

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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