The Price of Obscenity in Housing Markets: Evidence from Closing Prostitution Windows
99 Pages Posted: 29 Jun 2017 Last revised: 31 Mar 2020
Date Written: February 17, 2020
This paper estimates the externality created by sinful activities on housing demand. We study the case of overt prostitution in Amsterdam, where this industry is legalized. To pin down the sin factor in house prices, we exploit a spatial discontinuity in the location of brothel windows, combined with a policy that changed their location. Our results show that homes are 30% cheaper if next door to sex workers. Interestingly though, we also present evidence that allowing prostitution increases local employment. Our findings suggest that households tend to be against the visible presence of sinful businesses, regardless of their socio-economic benefits.
Keywords: Sinful Assets, Real Estate, Prostitution, Externality, Social Discount
JEL Classification: G41, H43, K42, L83, R21
Suggested Citation: Suggested Citation