The Value of Location Comes Down to Measurement, Measurement, Measurement
Open AccessThis dissertation consists of three essays, each related to measuring inter-area differences in property value. Chapter 1 constructs inter-area measures of aggregate land value using imputed land values, taken from Larson et al. [2021], to estimate an urban land rent gradient for each city. This first chapter produces estimates of inter-city variation in aggregate land value that are consistent with theoretical expectations and agree well with the only previous study to estimate aggregate land values, Albouy et al. [2018].Chapter 2 uses the Chapter 1 estimates of aggregate land value to answer the question: do common land-use planning restrictions lower or raise aggregate welfare in cities? I show that previous attempts to answer this question, which are based on variation in housing cost, are misplaced and that the welfare effects can be tested using (1) a Rosen-Roback test for amenity effects and (2) an aggregate land rent value test, which provides a dispositive test of the aggregate welfare effects of urban planning. Empirical tests indicate that the house price effects of planning regulation result in a compensating increase in urban amenity and that the relation between historical patterns of planning regulation and current aggregate land value is positive, implying that planning could potentially be a remedy for problems of overbuilding under laissez-faire land development.The final chapter develops a new inter-area housing price index called “FIBO” after demonstrating that inter-area housing price indexes relying on median house price or pooled hedonic regressions adjust imperfectly for the effects of differences in implicit prices and housing characteristics. “FIBO”, a Fisher Ideal aggregation of a two-way Blinder-Oaxaca decomposition, improves upon current inter-area house price indexes because it is far less influenced by the specific areas studied, sample sizes from each area, and housing characteristics included.
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