Essays on the economics of housing

Date of Completion

January 2011


Economics, General




This dissertation examines two different questions about housing and location choice. The first essay considers the importance of neighborhood in the dynamics of urban settlements. People sort between neighborhoods until they find one that matches their preferences regarding local public goods and taxes. So the equilibrium housing sales price reflects the marginal willingness to pay for characteristics of the house as well as characteristics of the location. It has been pointed out in the literature that previous studies substantially overestimate the true effect of the local school quality on house prices because school quality possibly correlates with neighborhood quality. Therefore, the first essay' adopts the recent boundary approach for addressing omitted neighborhood attributes in order to examine the impact of school quality at the school district level on property values using a differences-indifferences strategy. ^ The other two essays in the dissertation focus on the issue of discrimination against minority home buyers that may lead to the segregation of neighborhoods. Several theories of discrimination predict that discriminatory behavior of brokers will limit minority opportunities for owning a house in a predominantly white neighborhood. Earlier studies have tested different hypotheses regarding differential treatment of white customers and minority customers, like the broker-prejudice hypothesis, the white-customer-prejudice hypothesis and statistical discrimination. The location of the broker's office in a neighborhood with a large settlement of a particular minority group can also influence the behavior of the broker, since he is likely to cater to the majority group in the neighborhood so as not to lose potential customers referred by them. These essays use fair housing audit data from the 2000 Housing Discrimination Study on three large minority groups in Los Angeles to examine the causes of spatial variation of the nature of discrimination. The second essay adopts the traditional techniques to study discrimination in a single city to examine the impact of neighborhood factors on the discriminatory behavior of real estate agents toward minorities. The third essay complements this study by developing a new methodological approach to conduct a more spatially-detailed analysis of housing discrimination, which was not possible with traditional techniques. ^