From Central Planning to Centrality: Krakow's Land Prices after Poland's Big Bang

We examine commercial land markets in Krakow, Poland over a ten-year period of transitionfrom socialist management to a market economy. We explore the spatial and temporal evolutionof land prices over this period. In particular, we are interested in identifying trends toward oraway from centrality, and in discovering whether or not these trends acted on the city center aloneor over a set of centers. The data set we employ is uniquely appropriate for this purpose as thedensifying force of \highest-and-best" use - typically found in market-oriented cities - was absentunder four decades of socialist planning, leaving undeveloped land scattered throughout the city.Free of quality-control issues associated with disentangling the value of land from properties inwhich land and structures are bundled, the data o®er a clean assessment of land prices within anurban area. We employ a novel, iterative approach to identify pricing centers -\nodes" of similarly-sized residuals - which we interpret as evidence of omitted spatial amenities. Using this approach,we find that the price gradient in Krakow evolved towards concentration, but concentration inseveral centers rather than in just one. We find that the exclusion of proximity to these centersleads to biased coefficients in the hedonic regressions; we also find that the majority of the apparentspatial autocorrelation in the aspatial regressions results from the omission of proximity to thesecenters.