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DRS. MUTH AND MILLS MEET DR. TIEBOUT: INTEGRATING LOCATION-SPECIFIC AMENITIES INTO MULTI-COMMUNITY EQUILIBRIUM MODELS

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ABSTRACT. 

We consider the problem of integrating spatial amenities into locational equilibrium models with multiple jurisdictions. We provide sufficient conditions under which models that assume a single housing price in each community continue to apply in the presence of location-specific amenities that vary both within and across communities. If these conditions are satisfied, the models, estimation methods, and results in Epple and Sieg (1999) are valid in the presence of (potentially unobserved) location-specific amenities. We also show how to construct sufficient statistics that capture location specific spatial heterogeneity. We apply these techniques using data from the Pittsburgh metropolitan area. We find that these amenity measures capture proximity to important local employment centers as well as heterogeneity in school quality within a given school district.
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Document Type: Research Article

Affiliations: 1: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Ave, Pittsburgh, PA 15213., Email: [email protected] 2: Columbia Business School, 3022 Broadway, New York, NY 10027., Email: [email protected] 3: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Ave, Pittsburgh, PA 15213., Email: [email protected]

Publication date: 2010-02-01

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