The Rising Demand for Subway after Private Driving Restriction: Evidence from Beijing’s Housing Market

Posted: 11 Nov 2019

See all articles by Yangfei Xu

Yangfei Xu

Tsinghua University - Hang Lung Center for Real Estate

Qinghua Zhang

Peking University - Guanghua School of Management

Siqi Zheng

Massachusetts Institute of Technology (MIT) - Center for Real Estate; Massachusetts Institute of Technology (MIT) - Department of Urban Studies & Planning; Hang Lung Center for Real Estate, Tsinghua University

Date Written: October 30, 2019

Abstract

This paper studies to what extent subway demand increased after the Beijing city government imposed restrictions on private driving in October, 2008. Utilizing a pseudo-repeat sale approach in a short sample period that includes 6 months before and after this exogenous shock, we mitigate the omitted variables problem, a common limitation in existing subway capitalization studies. We estimate the incremental effect of subway capitalization, and infer a 1.8 to 2.7 percentage point increase in people's willingness to pay for subway proximity, which is roughly 36% to 60% of the initial price premium for subway proximity. This increase is mainly due to the change in transportation mode following the driving restriction policy. We also find that the increase in demand for subway proximity exhibits significant spatial heterogeneity. Locations where subway travel time can better match that of car travel experience relatively higher housing price appreciation. Moreover, we find evidence that the increase in subway premium persists over time. Our estimation provides a basis for a sound cost–benefit analysis regarding how much and where the government should increase the supply of subway services after imposing restrictions on private driving.

Suggested Citation

Xu, Yangfei and Zhang, Qinghua and Zheng, Siqi, The Rising Demand for Subway after Private Driving Restriction: Evidence from Beijing’s Housing Market (October 30, 2019). Available at SSRN: https://ssrn.com/abstract=3478253

Yangfei Xu

Tsinghua University - Hang Lung Center for Real Estate ( email )

HeShanHeng Building
Beijing, 100084
China

Qinghua Zhang

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Siqi Zheng (Contact Author)

Massachusetts Institute of Technology (MIT) - Center for Real Estate ( email )

Building 9-323
Cambridge, MA 02139
United States

HOME PAGE: http://https://siqizheng.mit.edu/

Massachusetts Institute of Technology (MIT) - Department of Urban Studies & Planning ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

Hang Lung Center for Real Estate, Tsinghua University ( email )

HeShanHeng Building
Beijing, 100084
China

HOME PAGE: http://https://siqizheng.mit.edu/

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