Quantifying Real Estate Externalities: Evidence on the Whole Foods Effect

Abstract

Real estate amenities can create both benefits and costs to local community, which economists call externalities. Quantification of externalities is challenging because of potential endogeneity problems that render simple statistical analyses inaccurate, necessitating the use of a more rigorous econometric technique. Exploiting store expansion activities of Whole Foods Market to infer the causal impact of the Whole Foods Effect using the difference-in-differences strategy, we find that property prices within 0.5 mile of a new Whole Foods Market store increase on average by 6.7% after a new store opens.