Nationality Bias at Home and Abroad: Theory and Evidence from Commercial Real Estate
47 Pages Posted: 15 Mar 2018 Last revised: 20 Mar 2018
Date Written: March 15, 2018
We document a new "nationality bias" which impedes the efficient functioning of global markets for commercial real estate. In a large and comprehensive database of global commercial real estate transactions we find that buyers are significantly more likely to purchase properties from sellers with the same nationality. This preference to transact with the same nationality is quantitatively large and robust. We build an equilibrium search model of this market embedding a new matching friction, and structurally estimate it. When we evaluate the counterfactual impacts of eliminating the friction in our model, we find substantial gains in liquidity and prices in the market.
Keywords: Nationality Bias, Search and Matching, Commercial Real Estate
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