Racial Preferences in a Small Urban Housing Market: A Spatial Econometric Analysis of Microneighborhoods in Kingston, New York
Bard College - The Levy Economics Institute
University of California, San Diego (UCSD) - Department of Economics
Boston College - Department of Finance and Department of Economics
May 19, 2010
Levy Economics Institute Working Paper No. 599
This paper use spatial econometric models to test for racial preferences in a small urban housing market. Identifying racial preferences is difficult when unobserved neighborhood amenities vary systematically with racial composition. We adopt three strategies to redress this problem: (1) we focus on housing price differences across microneighborhoods in the small and relatively homogenous city of Kingston, New York; (2) we introduce GIS-based spatial amenity variables as controls in the hedonic regressions; and (3) we use spatial error and lag models to explicitly account for the spatial dependence of unobserved neighborhood amenities. Our simple OLS estimates agree with the consensus in the literature that black neighborhoods have lower housing prices. However, racial price discounts are no longer significant when we account for the spatial dependence of errors. Our results suggest that price discounts in black neighborhoods are caused not by racial preferences but by the demand for amenities that are typically not found in black neighborhoods.
Number of Pages in PDF File: 36
Keywords: Housing, Race, Neighborhood Amenities, Spatial Econometrics
JEL Classification: J15, R21working papers series
Date posted: May 28, 2010
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