Hedonic markets and sorting equilibria: Bid-function envelopes for public services and neighborhood amenities

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13 Scopus citations

Abstract

Hedonic regressions with house value as the dependent variable are widely used to study public services and neighborhood amenities. This paper builds on the theory of household bidding and sorting across communities to derive bid-function envelopes, which provide a form for these regressions. This approach allows for household heterogeneity and multiple amenities, yields estimates of the price elasticity of amenity demand directly from the hedonic without a Rosen two-step procedure, and provides tests of hypotheses about sorting. An application to Cleveland area data from 2000 yields price elasticities for school quality and neighborhood ethnic composition and supports the sorting hypotheses.

Original languageEnglish (US)
Pages (from-to)9-25
Number of pages17
JournalJournal of Urban Economics
Volume86
DOIs
StatePublished - Mar 1 2015

Keywords

  • Capitalization
  • Demand for public services
  • Hedonics
  • Sorting

ASJC Scopus subject areas

  • Economics and Econometrics
  • Urban Studies

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