Leung, Tin Cheuk and Tsang, Kwok Ping (2011): Love Thy Neighbor: Income Distribution and Housing Preferences.
Download (2MB) | Preview
Do homeowners prefer living in an area with a more equal distribution of income? We answer this question by estimating a semi-parametric hedonic pricing model for about 90,000 housing units transacted in Hong Kong between 2005 and 2006. We first identify a hedonic price function by locally regressing the rental price of the housing unit on its intrinsic and neighborhood characteristics, one of which is the Gini coefficient for household income of the constituency area. We then combine the estimates with a log utility function to obtain the heterogeneous preference parameters. Finally, we estimate the joint distribution of the preference parameters and demographics. We find that most homeowners have a strong distaste for inequality in their neighborhood, and the distaste increases with income and goes down with education level. Counterfactual experiments show that reallocating Public Rental Housing by half can increase the welfare of homeowners by about HK$8,000 on average per year, an amount which is equivalent to increasing the housing unit by 20 square feet or reducing the age of the unit by 5 years.
|Item Type:||MPRA Paper|
|Original Title:||Love Thy Neighbor: Income Distribution and Housing Preferences|
|Keywords:||hedonic pricing; housing; income inequality|
|Subjects:||R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Production Analysis, and Firm Location > R32 - Other Production and Pricing Analysis
R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand
R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R23 - Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
|Depositing User:||Unnamed user with email email@example.com|
|Date Deposited:||07. Aug 2011 06:32|
|Last Modified:||11. Feb 2013 21:59|
Alesina, A., R. Baqir, and W. Easterly (1999): "Public Goods and Ethnic Divisions," Quarterly Journal of Economics, 114(4), 1243-1284.
Bajari, P., and C. L. Benkard (2005a): "Demand Estimation with Heterogenous Consumers and Unobserved Product Characteristics: A Hedonic Approach," Journal of Political Economy, 113(6), 1239-1276.
Bajari, P., and C. L. Benkard (2005b): "Hedonic Price Indexes with Unobserved Product Characteristics," Journal of Business and Economics Statistics, 23(1), 61-75.
Bajari, P., and M. E. Kahn (2005): "Estimating Housing Demand with an Application to Explaining Racial Segregation in Cities," Journal of Business and Economics Statistics, 23(1), 20-33.
Bajari, P., and M. E. Kahn (2008): "Estimating Hedonic Models of Consumer Demand with an Application to Urban Sprawl," Hedonic Methods in Housing Market, Springer.
Berry, S., J. Levinsohn, and A. Pakes (1995): "Automobile Prices in Market Equilibrium," Econometrica, 63(4), 841-890.
Epple, D., and G. J. Platt (1998): "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Income," Journal of Urban Economics, 43, 23-51.
Fan, J., and I. Gijbels (1996): Local Polynomial Modelling and Its Applications: Monographs on Statistics and Applied Probability 66. CRC, London, UK.
Fernandez, R., and R. Rogerson (1996): "Income Distribution, Communities, and the Quality of Public Education," Quarterly Journal of Economics, 111(1), 135-164.
Gans, H. J. (1961): "The Balanced Community: Homogeneity or Heterogeneity in Residential Areas?," Journal of the American Planning Association, 27(3), 176-184.
Hanushek, E., and K. Yilmaz (2007): "The complementarity of Tiebout and Alonso," Journal of Housing Economics, 16(2), 243-261.
Hanushek, E., and K. Yilmaz (2010): "Household Location and Schools in Metropolitan Areas with Heterogeneous Suburbs; Tiebout, Alonso, and Government Policy," NBER working paper, (15915).
Ioannides, Y. M. (2002): "Residential Neighborhood Effects," Regional Science and Urban Economics, 32, 145-165.
Ioannides, Y. M. (2004): "Neighborhood Income Distributions," Journal of Urban Economics, 56, 435-457.
Leung, C. K. Y., C. K. G. Lau, and Y. C. F. Leong (2002): "Testing Alternative Theories of the Property Price-Trading Volume Correlation," Journal of Real Estate Research, 23(3), 253-264.
Leung, C. K. Y., Y. C. F. Leong, and S. K. Wong (2006): "Housing Price Dispersion: An Empirical Investigation," Journal of Real Estate Finance and Economics, 32(3), 357-385.
Nevo, A. (2000): "A Practitioner's Guide to Estimation of Random Coecients Logit Models of Demand," Journal of Economics and Management Strategy, 9(4), 513-548.
Petrin, A. (2002): "Quantifying the Benets of New Products: The Case of the Minivan," Journal of Political Economy, 110(4), 705-729.
Rossi, P., G. Allenby, and R. McCulloch (2005): Bayesian Statistics and Marketing. John Wiley and Sons, Hoboken, NJ.
Rossi-Hansberg, E., P.-D. Sarte, and R. Owens (2010): "Housing Externalities," Journal of Political Economy, 118(3), 485-535.
Sarpca, S., C. K. Y. Leung, and K. Yilmaz (2010): "Public Housing Units vs. Housing Vouchers: Accessibility, Local Public Goods, and Welfare," working paper.
Tiebout, C. M. (1956): "A Pure Theory of Local Expenditures," Journal of Political Economy, 64(5), 416-424.
Tricomi, E., A. Rangel, C. F. Camerer, and J. O'Doherty (2010): "Neural Evidence for Inequality-Averse Social Preferences," Nature, 463(25), 1089-1092.