The McMansion Effect: Positional Externalities in U.S. Suburbs

Abstract

This paper examines how the construction of very large homes - or "McMansions" - in U.S. suburbs affects homeowners' satisfaction and housing behavior. Combining three decades of survey data with geolocated information on three million suburban houses, I find that homeowners exposed to newly constructed, large houses report lower satisfaction with their own homes, while their neighborhood satisfaction remains unaffected. This effect is contingent on the visual salience of McMansions, as indicated by their proximity to roads. Homeowners exposed to new-built McMansions are more likely to expand their own homes and take on more debt. (JEL D12, R21, Z13, I31, E70)

Keywords: Positional Goods, Relative Consumption, Subjective Wellbeing, Housing, Inequality

JEL Classification: D12, Z13, I31