New Housing Supply and the Dilution of Social Capital
Research Papers in Environmental and Spatial Analysis No. 123
45 Pages Posted: 6 Sep 2007
Date Written: August 2, 2007
This paper examines the role of local housing market conditions for social capital accumulation and neighborhood club good provision. A model of individual investment decisions predicts that in a setting with high property transaction costs (i) homeowners are more likely to invest in social capital than renters and (ii) the positive link between homeownership and social capital is stronger in more built-up neighborhoods with inelastic supply of new housing. In these neighborhoods homeowners are largely protected from inflows of newcomers that would dilute the net benefit from social capital in the longer run. Empirical evidence from the Social Capital Community Benchmark Survey confirms the model predictions. Instrumental variable estimates suggest that the effects are causal.
Keywords: House price capitalization, social capital, homeownership, land and housing supply, neighborhood club goods
JEL Classification: D71, R21, R31
Suggested Citation: Suggested Citation