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New housing supply and the dilution of social capital

  • Christian A. L. Hilber

This paper examines the role of local housing market conditions for social capital accumulation and neighborhood club good provision. A model of individual investment decisions predicts that in a setting with high property transaction costs (i) homeowners are more likely to invest in social capital than renters and (ii) the positive link between homeownership and social capital is stronger in more built-up neighborhoods with inelastic supply of new housing. In these neighborhoods homeowners are largely protected from inflows of newcomers that would dilute the net benefit from social capital in the longer run. Empirical evidence from the Social Capital Community Benchmark Survey confirms the model predictions. Instrumental variable estimates suggest that the effects are causal.

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File URL: http://eprints.lse.ac.uk/3573/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 3573.

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Length: 45 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:ehl:lserod:3573
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