Varying Implicit Prices of Housing Attributes: Testing Tiebout Theory

Seong Hoon Cho, Roland K. Roberts, Taeyoung Kim, Sae Woon Park, Heeho Kim

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

Abstract

The objective of this research was to test Tiebout's (1956) theory of residential segregation without dividing housing observations into submarkets, which causes sample selection bias and degrees-of-freedom problems. To achieve the objective, we used spatial-lag quantile regression along with housing auction data for three Gu (county equivalent in the USA) (i.e., Gangnam, Songpa, and Nowon) in Seoul during January 2006 through December 2012. Our findings suggest that preferences for housing structural attributes that are related with practical necessity (i.e., age, size, and number of floor) do not vary across the quantiles of the price distribution. In contrast, attributes that may be considered as premium amenities (i.e., mountain or river view, number of story of the building, and affluent neighborhoods) tend to vary over the quantiles of the price distribution. Consequently, we do not reject the hypothesis that the Tiebout theory explains the residential segregation that sorts population into different neighborhoods. More specifically, we find the evidence that the residential segregation is determined by more of premium amenities than housing structural attributes of practical necessity.

Original languageEnglish
Title of host publicationHandbook of Asian Finance
Subtitle of host publicationREITs, Trading, and Fund Performance
PublisherElsevier Inc.
Pages117-129
Number of pages13
Volume2
ISBN (Electronic)9780128010631
ISBN (Print)9780128009864
DOIs
StatePublished - 28 May 2014

Keywords

  • Housing auction
  • Housing structural attributes
  • Premium amenities
  • Residential segregation
  • Sample selection bias
  • Spatial-lag quantile regression
  • Tiebout's (1956) theory

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