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Housing Externalities

  • Esteban Rossi-Hansberg
  • Pierre-Daniel Sarte
  • Raymond Owens III

Using data compiled from concentrated residential urban revitalization programs implemented in Richmond, VA, between 1999 and 2004, we study residential externalities. Specifically, we provide evidence that in neighborhoods targeted by the programs, sites that did not directly benefit from capital improvements nevertheless experienced considerable increases in land value relative to similar sites in a control neighborhood. Within the targeted neighborhoods, increases in land value are consistent with externalities that fall exponentially with distance. In particular, we estimate that housing externalities decrease by half approximately every 990 feet. On average, land prices in neighborhoods targeted for revitalization rose by 2 to 5 percent at an annual rate above those in the control neighborhood. These increases translate into land value gains of between $2 and $6 per dollar invested in the program over a six-year period. We provide a simple theory that helps us interpret and estimate these effects.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14369.

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Date of creation: Sep 2008
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Publication status: published as 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.
Handle: RePEc:nbr:nberwo:14369
Note: EFG PE
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  11. Yatchew, A., 1997. "An elementary estimator of the partial linear model," Economics Letters, Elsevier, vol. 57(2), pages 135-143, December.
  12. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
  13. Schall, Lawrence D, 1976. "Urban Renewal Policy and Economic Efficiency," American Economic Review, American Economic Association, vol. 66(4), pages 612-28, September.
  14. Strange, William, 1992. "Overlapping neighborhoods and housing externalities," Journal of Urban Economics, Elsevier, vol. 32(1), pages 17-39, July.
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