Ethnic segregation and heterogeneous preferences of homeowners for housing and neighbourhood characteristics : evidence from the Netherlands

This paper examines ethnically differentiated preferences for neighbourhood ethniccomposition among homeowners in the Netherlands. Borrowing from price hedonic theory, it tests a fully nonparametric empirical model of housing choice. We exploit rich neighbourhood-level administrative data linked to the 2009 Dutch Housing and Living Survey. The nonparametric analysis proceeds in two steps. First, housing prices are decomposed into attribute-specific implicit prices. These price hedonic estimates indicate a significant negative effect of the percentage of non-western minority residents in a neighbourhood on housing prices. For the second step and using the recovered household preference parameters, the marginal willingness to pay for an increase in non-western minority neighbours is estimated. Our model predicts an average decrease in dwelling price of 697 for every 10 per cent increase in non-western neighbours. The paper finds evidence of assimilation with some homeowners of non-western migrant background having a negative willingness to pay for living next to more co-ethnic neighbours.