Nationality Bias at Home and Abroad: Theory and Evidence from Commercial Real Estate

47 Pages Posted: 15 Mar 2018 Last revised: 20 Mar 2018

Cristian Badarinza

National University of Singapore (NUS)

Tarun Ramadorai

Imperial College London; Centre for Economic Policy Research (CEPR)

Chihiro Shimizu

Nihon University

Date Written: March 15, 2018

Abstract

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

Suggested Citation

Badarinza, Cristian and Ramadorai, Tarun and Shimizu, Chihiro, Nationality Bias at Home and Abroad: Theory and Evidence from Commercial Real Estate (March 15, 2018). Available at SSRN: https://ssrn.com/abstract=3141255 or http://dx.doi.org/10.2139/ssrn.3141255

Cristian Badarinza (Contact Author)

National University of Singapore (NUS) ( email )

Bukit Timah Road 469 G
Singapore, 117591
Singapore

Tarun Ramadorai

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

HOME PAGE: http://www.tarunramadorai.com

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Chihiro Shimizu

Nihon University ( email )

3-34-1, Shimouma
Tokyo, Tokyo 154-8513
Japan
+81-3-6453-1715 (Phone)
+81-3-6453-1630 (Fax)

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