IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Do homeowners benefit urban neighborhoods? Evidence from housing prices

  • Mika Kortelainen
  • Tuukka Saarimaa

Homeownership is heavily subsidized in many countries mainly through the tax code. The adverse effects of lenient tax treatment of owner-occupied housing on economic efficiency and growth are large and well documented in the economics literature. The main argument in favor of subsidizing owner-occupied housing is that it creates positive externalities that offset these adverse effects. This paper tests whether homeowners create positive externalities to their immediate neighborhood that capitalize into housing prices in multi-storey buildings. Using semiparametric hedonic regressions with and without instrumental variables we find no evidence of positive externalities from neighborhood homeownership rate. This result is robust to relaxing the identification assumptions of our instrument using a recently developed set identification method. Our results suggest that the adverse efficiency effects of lenient tax treatment of owneroccupied housing are not offset by positive externalities.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.vatt.fi/file/vatt_publication_pdf/wp36.pdf
Download Restriction: no

File URL: http://www.vatt.fi/publications/latestPublications/publication/Publication_1345_id/921
Download Restriction: no

Paper provided by Government Institute for Economic Research Finland (VATT) in its series Working Papers with number 36.

as
in new window

Length:
Date of creation: 03 Sep 2012
Date of revision:
Handle: RePEc:fer:wpaper:36
Contact details of provider: Postal:
Arkadiankatu 7, P.O. Box 1279, FI-00101 Helsinki

Phone: +358 295 519 400
Fax: +358 295 519 599
Web page: http://www.vatt.fi/
Email:


More information through EDIRC

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. repec:esx:essedp:718 is not listed on IDEAS
  2. Qi Li & Jeffrey Scott Racine, 2006. "Nonparametric Econometrics: Theory and Practice," Economics Books, Princeton University Press, edition 1, number 8355.
  3. Aviv Nevo & Adam M. Rosen, 2012. "Identification With Imperfect Instruments," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 659-671, August.
  4. Boehm, Thomas P. & Schlottmann, Alan M., 1999. "Does Home Ownership by Parents Have an Economic Impact on Their Children?," Journal of Housing Economics, Elsevier, vol. 8(3), pages 217-232, September.
  5. Denice DiPasquale & Edward L. Glaeser, 1997. "Incentives and Social Capital: Are Homeowners Better Citizens?," Harvard Institute of Economic Research Working Papers 1815, Harvard - Institute of Economic Research.
  6. Martin Gervais, 1998. "Housing Taxation and Capital Accumulation," UWO Department of Economics Working Papers 9807, University of Western Ontario, Department of Economics.
  7. Berkovec, James & Fullerton, Don, 1992. "A General Equilibrium Model of Housing, Taxes, and Portfolio Choice," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 390-429, April.
  8. Jonathan Skinner, 1990. "The Dynamic Efficiency Cost of Not taxing Housing," NBER Working Papers 3454, National Bureau of Economic Research, Inc.
  9. Edward L. Glaeser & Bruce Sacerdote, 2000. "The Social Consequences of Housing," NBER Working Papers 8034, National Bureau of Economic Research, Inc.
  10. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2004. "Identification and Estimation of Hedonic Models," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S60-S109, February.
  11. Edward L. Glaeser & Jesse M. Shapiro, 2002. "The Benefits of the Home Mortgage Interest Deduction," NBER Working Papers 9284, National Bureau of Economic Research, Inc.
  12. Tuukka Saarimaa, 2008. "Imputed Rental Income, Taxation and Income Distribution in Finland," Discussion Papers 446, Government Institute for Economic Research Finland (VATT).
  13. Esteban Rossi-Hansberg & Pierre-Daniel Sarte & Raymond Owens, 2010. "Housing Externalities," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 485-535, 06.
  14. Hilber, Christian A. L., 2007. "New Housing Supply and the Dilution of Social Capital," MPRA Paper 5134, University Library of Munich, Germany.
  15. Engelhardt, Gary V. & Eriksen, Michael D. & Gale, William G. & Mills, Gregory B., 2010. "What are the social benefits of homeownership? Experimental evidence for low-income households," Journal of Urban Economics, Elsevier, vol. 67(3), pages 249-258, May.
  16. James M. Poterba & Todd M. Sinai, 2008. "Income Tax Provisions Affecting Owner-Occupied Housing: Revenue Costs and Incentive Effects," NBER Working Papers 14253, National Bureau of Economic Research, Inc.
  17. 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.
  18. Jeffrey R. Kling & Jeffrey B. Liebman & Lawrence F. Katz, 2005. "Experimental Analysis of Neighborhood Effects," NBER Working Papers 11577, National Bureau of Economic Research, Inc.
  19. Brasington, David M., 2002. "Edge versus center: finding common ground in the capitalization debate," Journal of Urban Economics, Elsevier, vol. 52(3), pages 524-541, November.
  20. Allen Head & Huw Lloyd-Ellis, 2012. "Housing Liquidity, Mobility, and the Labour Market," Review of Economic Studies, Oxford University Press, vol. 79(4), pages 1559-1589.
  21. Li, Qi, 1996. "On the root-N-consistent semiparametric estimation of partially linear models," Economics Letters, Elsevier, vol. 51(3), pages 277-285, June.
  22. Michael Amior & Jonathan Halket, 2014. "Do households use home‚Äźownership to insure themselves? Evidence across U.S. cities," Quantitative Economics, Econometric Society, vol. 5(3), pages 631-674, November.
  23. Oliver Lerbs & Christian Oberst, 2011. "Explaining the Spatial Variation in Homeownership Rates: Results for German Regions," CESifo Working Paper Series 3377, CESifo Group Munich.
  24. David Barker & Eric Miller, 2009. "Homeownership and Child Welfare," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(2), pages 279-303.
  25. Daniel P. McMillen, 2010. "Issues In Spatial Data Analysis," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 119-141.
  26. Daniel P. McMillen & Christian L. Redfearn, 2010. "Estimation And Hypothesis Testing For Nonparametric Hedonic House Price Functions," Journal of Regional Science, Wiley Blackwell, vol. 50(3), pages 712-733.
  27. Coulson, N. Edward & Fisher, Lynn M., 2009. "Housing tenure and labor market impacts: The search goes on," Journal of Urban Economics, Elsevier, vol. 65(3), pages 252-264, May.
  28. Banzhaf, H. Spencer & Farooque, Omar, 2013. "Interjurisdictional housing prices and spatial amenities: Which measures of housing prices reflect local public goods?," Regional Science and Urban Economics, Elsevier, vol. 43(4), pages 635-648.
  29. Marjorie Flavin & Takashi Yamashita, 2002. "Owner-Occupied Housing and the Composition of the Household Portfolio," American Economic Review, American Economic Association, vol. 92(1), pages 345-362, March.
  30. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-54, July.
  31. Linneman, Peter, 1985. "An economic analysis of the homeownership decision," Journal of Urban Economics, Elsevier, vol. 17(2), pages 230-246, March.
  32. repec:dau:papers:123456789/6486 is not listed on IDEAS
  33. Glaeser, Edward Ludwig, 2011. "Rethinking the Federal Bias Toward Homeownership," Scholarly Articles 8052149, Harvard Kennedy School of Government.
  34. Donald R. Haurin & Toby L. Parcel & R. Jean Haurin, 2002. "Does Homeownership Affect Child Outcomes?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(4), pages 635-666.
  35. Hoff, Karla & Sen, Arijit, 2004. "Homeownership, community interactions, and segregation," Policy Research Working Paper Series 3316, The World Bank.
  36. Tuukka Saarimaa, 2011. "Imputed Rental Income, Taxation and Income Distribution in Finland," Urban Studies, Urban Studies Journal Limited, vol. 48(8), pages 1695-1714, June.
  37. 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..
  38. Li, Qi & Stengos, Thanasis, 1996. "Semiparametric estimation of partially linear panel data models," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 389-397.
  39. Poterba, James M, 1992. "Taxation and Housing: Old Questions, New Answers," American Economic Review, American Economic Association, vol. 82(2), pages 237-42, May.
  40. Brueckner, Jan K, 1997. "Consumption and Investment Motives and the Portfolio Choices of Homeowners," The Journal of Real Estate Finance and Economics, Springer, vol. 15(2), pages 159-80, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fer:wpaper:36. 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: (Anita Niskanen)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.