Using Home Buyers' Revealed Preferences to Define the Urban-Rural Fringe
Posted: 18 Apr 2007
Date Written: April 4, 2007
The location of new homes defines the urban-rural fringe and determines many facets of the urban-rural interaction set in motion by construction of new homes in previously rural areas. Home, neighborhood and school district characteristics play a crucial role in determining the spatial location of new residential construction, which in turn defines the boundary and spatial extent of the urban-rural fringe. We develop and apply a spatial hedonic variant of the Blinder-Oaxaca price decomposition to newer versus older home sales in the Columbus, Ohio metropolitan area during the year 2000. The preferences of buyers of newer homes are compared to those who purchased the nearest neighboring older home located in the same census block group, during the same year. Use of the nearest older home purchased in the same location represents a methodology to control for various neighborhood, social-economic-demographic and school district characteristics that influence home prices. Since newer homes reflect current preferences for home characteristics while older homes reflect past preferences for these characteristics, we use the price differentials between newer and older home sales in the Blinder-Oaxaca decomposition to assess the relative significance of various house characteristics to home buyers. Finally, our analysis examines characteristics that are valued highly by home buyers with reference to distance from the center of the Columbus metropolitan area to shed light on the spatial extent of the urban-rural fringe.
Keywords: spatial Oaxacca-Blinder decomposition, Bayesian MCMC estimation
JEL Classification: C11, C21, O47, O52, R11
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