The Price of Obscenity in Housing Markets: Evidence from Closing Prostitution Windows

99 Pages Posted: 29 Jun 2017 Last revised: 31 Mar 2020

See all articles by Erasmo Giambona

Erasmo Giambona

Syracuse University - Whitman School of Management - Finance Department; James D. Kuhn Center for Real Estate

Rafael P. Ribas

University of Amsterdam - Finance Group

Date Written: February 17, 2020

Abstract

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

Giambona, Erasmo and Ribas, Rafael Perez, The Price of Obscenity in Housing Markets: Evidence from Closing Prostitution Windows (February 17, 2020). Available at SSRN: https://ssrn.com/abstract=2994037 or http://dx.doi.org/10.2139/ssrn.2994037

Erasmo Giambona

Syracuse University - Whitman School of Management - Finance Department; James D. Kuhn Center for Real Estate ( email )

721 University Avenue
RM 120-D
Syracuse, NY 13244-2450
United States
315 443-4885 (Phone)

Rafael Perez Ribas (Contact Author)

University of Amsterdam - Finance Group ( email )

Plantage Muidergracht 12
Room M 3.06
Amsterdam, 1018 TV
Netherlands

HOME PAGE: http://https://sites.google.com/site/r4ribas/

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