Interjurisdictional Capitalization of a New Metro Line on Housing Values
Claudio A. Agostini
Universidad Adolfo Ibañez
Gastón A. Palmucci
Fiscalia Nacional Economica
Many governments continue constructing new subway lines with the goal of reducing congestion and pollution in large cities. Besides the potential global effects on reducing negative externalities in the city, there are some local positive effects in terms of lower commuting time and distance for residents living close to the subway stations. These benefits of the public transport services should capitalize totally or partially on housing prices. Most of the empirical work has estimated the effects on housing prices after the public transit infrastructure is operating and implicitly assumed homogeneous capitalization across jurisdictions. However, due to differences on local public goods provision and residents' characteristics across jurisdictions, two identical housing units located at the same distance to the nearest metro station but in different local markets would not necessarily have the same degree of capitalization.
Using parametric and non-parametric methods and transaction data for Santiago, Chile, we estimate the anticipated capitalization of a new metro line across counties in the city. The results show significant anticipated effects, between 3.6% and 5.3%, and also large interjurisdictional differences in capitalization degrees, ranging between -6% and 40%.
Number of Pages in PDF File: 22
Keywords: Metro, Capitalization, Housing Prices, Subway
JEL Classification: H73, H54, R21, R53
Date posted: July 4, 2012