Capitalization as a Two-Part Tariff: The Role of Zoning

Spencer Banzhaf and Kyle Mangum

No 25699, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper shows that the capitalization of local amenities is effectively priced into land via a two-part pricing formula: a “ticket” price paid regardless of the amount of housing service consumed and a “slope” price paid per unit of services. We first show theoretically how tickets arise as an extensive margin price when there are binding constraints on the number of households admitted to a neighborhood. We use a large national dataset of housing transactions, property characteristics, and neighborhood attributes to measure the extent to which local amenities are capitalized in ticket prices vis-a-vis slopes. We find that in most U.S. cities, the majority of neighborhood variation in pricing occurs via tickets, although the importance of tickets rises sharply in the stringency of land development regulations, as predicted by theory. We discuss implications of two-part pricing for efficiency and equity in neighborhood sorting equilibria and for empirical estimates of willingness to pay for non marketed amenities, which generally assume proportional pricing only.

JEL-codes: D45 H41 H73 Q51 R31 R52 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-ure
Note: EEE
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Citations: View citations in EconPapers (1)

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Working Paper: Capitalization as a Two-Part Tariff: The Role of Zoning (2019)
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