Learning about the Neighborhood

56 Pages Posted: 30 Mar 2020 Last revised: 24 Apr 2020

See all articles by Zhenyu Gao

Zhenyu Gao

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Michael Sockin

University of Texas at Austin - Red McCombs School of Business

Wei Xiong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 2020

Abstract

We develop a model to analyze information aggregation and learning in housing markets. In the presence of pervasive informational frictions, housing prices serve as important signals to households and capital producers about the economic strength of a neighborhood. Our model provides a novel mechanism for amplification through learning in which noise from the housing market can propagate to the local economy, distorting not only migration into the neighborhood, but also the supply of capital and labor. We provide consistent evidence of our model implications for housing price volatility and new construction using data from the recent U.S. housing cycle.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Gao, Zhenyu and Sockin, Michael and Xiong, Wei, Learning about the Neighborhood (March 2020). NBER Working Paper No. w26907, Available at SSRN: https://ssrn.com/abstract=3563975

Zhenyu Gao (Contact Author)

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong
(852)39431824 (Phone)

HOME PAGE: http://sites.google.com/site/gao515515/

Michael Sockin

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States

Wei Xiong

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
3
Abstract Views
120
PlumX Metrics