Making – or Picking – Winners: Evidence of Internal and External Price Effects in Historic Preservation Policies
Much has been written identifying property price effects of historic preservation policies. Little attention has been paid to the possible policy endogeneity in hedonic price models. This paper outlines a general case of land use regulation in the presence of externalities and then demonstrates the usefulness of the model in an instrumental-variables estimation of a hedonic price analysis – with an application to historic preservation in Chicago. The theoretical model casts doubt on previous results concerning price effects of preservation policies. The comparative statics identify some determinants of regulation that seem, on the face of it, most unlikely to also belong in a hedonic price equation. The analysis employs these determinants as instruments for endogenous regulatory treatment in a hedonic price analysis. OLS estimation of the hedonic offers results consistent with much of previous literature, namely that property values are higher for historic landmarks. In the 2SLS hedonic, robust estimates of the "own" price effect of historic designation are shown to be large and negative (approx. -27%) for homes in landmark districts. Further, significant and substantively important (positive) external price effects of landmark designations are found. The paper concludes with a discussion of the policy implications of these findings for historic preservation.
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- Douglas S. Noonan, 2007. "Finding an Impact of Preservation Policies: Price Effects of Historic Landmarks on Attached Homes in Chicago, 1990-1999," Economic Development Quarterly, , vol. 21(1), pages 17-33, February.
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- Douglas Noonan & Douglas Krupka, 2010.
"Determinants of historic and cultural landmark designation: why we preserve what we preserve,"
Journal of Cultural Economics,
Springer, vol. 34(1), pages 1-26, February.
- Noonan, Douglas S. & Krupka, Douglas J., 2008. "Determinants of Historic and Cultural Landmark Designation: Why We Preserve What We Preserve," IZA Discussion Papers 3777, Institute for the Study of Labor (IZA).
- James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
- Coulson, N Edward & Leichenko, Robin M, 2001. "The Internal and External Impact of Historical Designation on Property Values," The Journal of Real Estate Finance and Economics, Springer, vol. 23(1), pages 113-24, July.
- Gabriel M. Ahlfeldt & Wolfgang Maennig, 2010. "Substitutability and Complementarity of Urban Amenities: External Effects of Built Heritage in Berlin," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(2), pages 285-323.
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