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Interjurisdictional Capitalization of a New Metro Line on Housing Values

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Abstract

Many governments continue constructing new subway lines with the goal of reducing congestion and pollution in large cities. Besides the potential global effects on reducing negative externalities in the city, there are some local positive effects in terms of lower commuting time and distance for residents living close to the subway stations. These benets of the public transport services should capitalize totally or partially on housing prices. Most of the empirical work has estimated the effects on housing prices after the public transit infrastructure is operating and implicitly assumed homogeneous capitalization across jurisdictions. However, due to differences on local public goods provision and residents' characteristics across jurisdictions, two identical housing units located at the same distance to the nearest metro station but in different local markets would not necessarily have the same degree of capitalization. Using parametric and non-parametric methods and transaction data for Santiago, Chile, we estimate the anticipated capitalization of a new metro line across counties in the city. The results show signicant anticipated effects, between 3.6% and 5.3%, and also large interjurisdictional differences in capitalization degrees, ranging between -6% and 40%.

Suggested Citation

  • Claudio Agostini & Gastón Palmucci, 2010. "Interjurisdictional Capitalization of a New Metro Line on Housing Values," ILADES-Georgetown University Working Papers inv244, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  • Handle: RePEc:ila:ilades:inv244
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    Keywords

    Metro; Capitalization; Housing Prices;

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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