EconPapers    
Economics at your fingertips  
 

Endogenous Gentrification and Housing Price Dynamics

Erik Hurst (), Daniel Hartley () and Veronica Guerrieri
Additional contact information
Veronica Guerrieri: University of Chicago

No 1418, 2011 Meeting Papers from Society for Economic Dynamics

Abstract: In this paper, we explore dierential changes in house prices across neighborhoods within a city to better understand the nature of house price dynamics across cities. First, we document in detail that there is substantial and systematic heterogeneity in house price dynamics within a city during city wide housing price booms and busts. Second, we propose a new model of within city house price dynamics that is consistent with the empirical facts. We assume that there is a positive neighborhood externality: people like to live close to richer neighbors. We show that there is an equilibrium where households fully segregate based on their income. In response to housing demand shocks, the model predicts that the poor neighborhoods on the boundary with the rich ones are the most price elastic. For example, when richer households enter a city, the rich neighborhoods will expand outward turning previous poor neighborhoods into richer neighborhoods. As the amenities in such neighborhoods increase, land prices in the neighborhood will increase accordingly. We refer to this process as gentrication. We then empirically test this new mechanism against other mechanisms that could explain within city house price dierences. We nd strong support for the existence of endogenous gentrication in explaining housing price dynamics within a city. Finally, we show that even after controlling for other important determinants of land prices, the endogenous gentrication mechanism is still important in explaining cross city dierences in house price dynamics.

Date: 2011
References: Add references at CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Endogenous gentrification and housing price dynamics (2013) Downloads
Working Paper: Endogenous gentrification and housing price dynamics (2010)
Working Paper: Endogenous Gentrification and Housing Price Dynamics (2010) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed011:1418

Access Statistics for this paper

More papers in 2011 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Series data maintained by Christian Zimmermann ().

 
Page updated 2017-10-11
Handle: RePEc:red:sed011:1418