Estimating the Demand for the Characteristics of Housing

Palmquist, Raymond B.

doi:10.2307/1924995

Cited by 343 publications

(200 citation statements)

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“…Uma compilação das fontes de endogeneidade pode ser encontrada em Epple (1987), o qual propõe o método de estimação dos preços hedônicos utilizando do modelo de multimercados. A utilização de multimercados e entre períodos proposta por Witte et al (1979), Palmquist (1984), Kahn e Lang (1988) Por conseguinte, outra questão trazida pela literatura de preços hedô-nicos reside no fato de que, por conta dos dados serem inerentemente espaciais, eles costumam ser espacialmente dependentes. Portanto, melhor análise pode ser fornecida quando o tratamento se dá por um método que considere a importância do espaço (Can, 1990(Can, , 1992Anselin, 1998), pois não considerar o efeito espacial no modelo econométrico afeta a magnitude das estimativas, sua signifi cância, bem como pode levar à má interpretação dos testes e heterocedasticidade (Anselin, 2003).…”

Section: Abordagem Empírica Do Modelo De Preços Hedônicosunclassified

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O mercado imobiliário residencial no município de São Paulo: uma abordagem de preços hedônicos espacial

Campos

2017

Nova econ.

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Resumo Um dos méritos da abordagem de preços hedô-nicos é poder estimar preços implícitos de carac- AbstractOne of the merits of hedonic prices treatment is its capacity to estimate implicit prices of characteristics that have not a specifi c market. For example, it is possible to estimate implicit characteristics of complex housing markets. The fi rst part of this paper is concerned with the microfoundations of AMM and AMM with amenity models. Using hedonic prices jointly with spatial econometrics estimation I intend to estimate the willingness of consumers to pay for house characteristics and amenities in the São Paulo housing market taking into account consumer profi le.

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Section: Abordagem Empírica Do Modelo De Preços Hedônicosunclassified

“…Palmquist (1984) afi rma que a segmentação é factível porque entre determinadas áreas hádiferenças nos preços dos imó-veis, enquanto dentro de uma mesmaárea não há. Epple (1987) demonstra que o problema de identifi cação é resolvido com o empilhamento de múl-tiplosmercados.…”

Section: Abordagem Econométricaunclassified

O mercado imobiliário residencial no município de São Paulo: uma abordagem de preços hedônicos espacial

Campos

2017

Nova econ.

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“…Palmquist (1984) directly estimated demand for certain house characteristics in seven metropolitan areas using the hedonic approach developed by Rosen (1974). 27 Quigley (1985) applied a discrete choice model to recover 25 The supply side is not modeled in this paper.…”

Section: Residential Location Decisions Modelmentioning

confidence: 99%

You can take it with you: Proposition 13 tax benefits, residential mobility, and willingness to pay for housing amenities

Ferreira

2010

Journal of Public Economics

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The endogeneity of prices has long been recognized as the main identification problem in the estimation of marginal willingness to pay (MWTP) for the characteristics of a given product. This issue is particularly important in the housing market, since a number of housing and neighborhood features are unobserved by the econometrician. This paper proposes the use of a well defined type of transaction costs-moving costs generated by property tax laws-to deal with this type of omitted variable bias. California's Proposition 13 property tax law is the source of variation in transaction costs used in the empirical analysis. Beyond its fiscal consequences, Proposition 13 created a lock-in effect on housing choice because of the implicit tax break enjoyed by homeowners living in the same house for a long time. Its importance to homeowners is estimated from a natural experiment created by two amendments that allow households headed by an individual over the age of 55 to transfer the implicit tax benefit to a new home. Indeed, 55-year old homeowners have 25% higher moving rates than those of comparable 54 year olds. These transaction costs from the property tax laws are then incorporated into a household sorting model. The key insight is that because of the property tax laws, different potential buyers may have different user costs for the same house. The exogenous property tax component of this user cost is then used as an instrumental variable. I find that MWTP estimates for housing characteristics are approximately 100% upward biased when the choice model does not account for the price endogeneity. Keywords AbstractIn 1978, Californians approved Proposition 13, which fixed property tax rates at 1% of housing prices at the time of purchase. Beyond its fiscal consequences, Proposition 13 created a lock-in effect on housing choice because of the implicit tax break enjoyed by homeowners living in the same house for a long time. In this paper, I provide estimates of this lock-in effect, using a natural experiment created by two subsequent amendments to Proposition 13 -Propositions 60 and 90. These amendments allow households headed by an individual over the age of 55 to transfer the implicit tax benefit to a new home. I show that mobility rates of 55-year old homeowners are approximately 25% higher than those of 54 year olds. The second contribution of this paper is the incorporation of transaction costs, due to Proposition 13, into a household location decision model, providing a new way to estimate marginal willingness to pay (MWTP) for housing characteristics. The key insight of this model is that because of the property tax laws, different potential buyers have different user costs for the same house. The exogenous property tax component of this user cost then works as an instrument to solve the main identification problem of revealed preference models -the correlation between price and unobserved quality of the product.* I am grateful to David Card and Kenneth Chay for their invaluable guidance and support. I ...

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“…Palmquist (1984) directly estimated demand for certain house characteristics in seven metropolitan areas using the hedonic approach developed by Rosen (1974). Recently, several papers adapted the discrete choice approach to the housing market, including Bajari and Kahn (2005), Bayer, McMillan and Rueben (2004) and Bayer, Ferreira and McMillan (2007).…”

Section: Residential Location Decisions Modelmentioning

confidence: 99%

You Can Take It with You: Transferability of Proposition 13 Tax Benefits, Residential Mobility, and Willingness to Pay for Housing Amenities

Ferreira

2004

SSRN Journal

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The endogeneity of prices has long been recognized as the main identification problem in the estimation of marginal willingness to pay (MWTP) for the characteristics of a given product. This issue is particularly important in the housing market, since a number of housing and neighborhood features are unobserved by the econometrician. This paper proposes the use of a well defined type of transaction costs-moving costs generated by property tax laws-to deal with this type of omitted variable bias. California's Proposition 13 property tax law is the source of variation in transaction costs used in the empirical analysis. Beyond its fiscal consequences, Proposition 13 created a lock-in effect on housing choice because of the implicit tax break enjoyed by homeowners living in the same house for a long time. Its importance to homeowners is estimated from a natural experiment created by two amendments that allow households headed by an individual over the age of 55 to transfer the implicit tax benefit to a new home. Indeed, 55-year old homeowners have 25% higher moving rates than those of comparable 54 year olds. These transaction costs from the property tax laws are then incorporated into a household sorting model. The key insight is that because of the property tax laws, different potential buyers may have different user costs for the same house. The exogenous property tax component of this user cost is then used as an instrumental variable. I find that MWTP estimates for housing characteristics are approximately 100% upward biased when the choice model does not account for the price endogeneity. KeywordsHousing demand, transaction costs, household behaviour Disciplines Economics | Other Social and Behavioral Sciences | Real Estate | TaxationThis journal article is available at ScholarlyCommons: http://repository.upenn.edu/real-estate_papers/70Electronic copy available at: http://ssrn.com/abstract=1427832The research program of the Center for Economic Studies (CES) produces a wide range of theoretical and empirical economic analyses that serve to improve the statistical programs of the U.S. Bureau of the Census. Many of these analyses take the form of CES research papers. The papers are intended to make the results of CES research available to economists and other interested parties in order to encourage discussion and obtain suggestions for revision before publication. The papers are unofficial and have not undergone the review accorded official Census Bureau publications.The opinions and conclusions expressed in the papers are those of the authors and do not necessarily represent those of the U.S. Bureau of the Census. Republication in whole or part must be cleared with the authors. All papers are screened to ensure that they do not disclose confidential information. Persons who wish to obtain a copy of the paper, submit comments about the paper, or obtain general information about the series should contact Sang V. Nguyen, Editor, Discussion Papers, Center for Economic Studies, Bureau of the Census, 4600 Si...

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Estimating the Demand for the Characteristics of Housing

Cited by 343 publications

References 13 publications

O mercado imobiliário residencial no município de São Paulo: uma abordagem de preços hedônicos espacial

O mercado imobiliário residencial no município de São Paulo: uma abordagem de preços hedônicos espacial

You can take it with you: Proposition 13 tax benefits, residential mobility, and willingness to pay for housing amenities

You Can Take It with You: Transferability of Proposition 13 Tax Benefits, Residential Mobility, and Willingness to Pay for Housing Amenities

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