Ethnic segregation and heterogeneous preferences of homeowners for housing and neighbourhood characteristics. Evidence from the Netherlands
Cheng Boon Ong & Kristof de Witte
#2013-061
This paper examines ethnically differentiated preferences for
neighbourhood ethnic composition among homeowners in the Netherlands.
Borrowing from price hedonic theory, it tests a fully nonparametric
empirical model of housing choice. We exploit rich neighbourhood-level
administrative data linked to the 2009 'Dutch Housing and Living
Survey'. The nonparametric analysis proceeds in two steps. First,
housing prices are decomposed into attribute-specific 'implicit prices'.
These price hedonic estimates indicate a significant negative effect of
the percentage of non-western minority residents in a neighbourhood on
housing prices. For the second step and using the recovered household
preference parameters, the marginal willingness to pay for an increase
in non-western minority neighbours is estimated. Our model predicts an
average decrease in dwelling price of €697 for every 10 per cent
increase in non-western neighbours. The paper finds evidence of
assimilation with some homeowners of non-western migrant background
having a negative willingness to pay for living next to more co-ethnic
neighbours.
Keywords: demand estimation, hedonic price, heterogeneous preference,
nonparametric, generalized kernel function, ethnic segregation
JEL Classification: R20, R21, R23, R31, R32