Hedonic house pricing of intangibles when housing depends on intangibles: the Trans-Israel Highway
|Speaker:||Michael Beenstock, Hebrew University of Jerusalem|
|Date:||Wednesday 11 December 2013|
|Time:||16.00 - 17.30|
|Location:||Matrix Lecture Theatre, Building One, Streatham Campus|
Standard hedonic house pricing assumes that house prices are independent of the intangible to be priced. A methodology is proposed in which the supply as well as the demand for housing depends on the intangible. The methodology is applied to value access the Trans-Israel Highway (TIH). Using spatial panel data during 2002 – 2008 we show that TIH, opened in 2002, had two effects on the housing market. It increased house prices in locations with greater access to TIH, and it affected housing construction. Standard hedonic pricing would have underestimated the value of access because it ignores the effects on housing construction of the intangible to be priced. A twin treatment effects methodology is proposed to estimate both of these effects. We show by bootstrapping that standard tests for weak instruments are misleading when the residuals are not normally distributed. We also show that the effects of TIH on the housing market diffuse slowly over time and they also diffuse over space. House prices began to increase three years before TIH was inaugurated, but housing construction did not anticipate the inauguration of TIH. In 2008 willingness-to-pay for access to TIH is estimated to be xxxx shekels or y% of GDP.