Professor of Public Administration and Economics,
The Maxwell School, Syracuse University
Wednesday, March 12th, 1:15pm, MVR 153
Hedonic regressions with house value as the dependent variable are widely used to study public services and neighborhood amenities. This paper builds on the theory of household bidding and sorting across communities to derive a bid-function envelope, which provides a form for these regressions. This approach allows for household heterogeneity, yields estimates of the price elasticities of amenity demand directly from the hedonic without a Rosen two-step procedure, and provides tests of hypotheses about sorting. An application to data from the Cleveland area in 2000 yields price elasticities for school quality and neighborhood ethnic composition and supports the sorting hypotheses.
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