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Paying for Good Neighbours: Estimating the Value of an Implied Educated Community

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  • Steve Gibbons

    (Department of Geography and Environment and Centre for Economic Performance, London School of Economics, Houghton Street, London, WC2A 2AE, UK, s.gibbons@lse.ac.uk)

Abstract

By definition, spillovers across households in residential communities mean that people incur costs from living in neighbourhoods where a high proportion of households suffer deprivation, regardless of their own economic circumstances. To verify the existence of intracommunity spillovers, this paper shows that home-owners in England and Wales are prepared to pay a substantial premium to avoid educationally poor neighbourhoods. An increase of 1 per cent in the proportion of higher-educated residents in a community, relative to the regional mean, increases prices by 0.24 per cent. One interpretation of this educational elasticity is that it estimates the social benefits of education in the local community. A hedonic approach is used, paying careful attention to the endogeneity of neighbourhood characteristics in a property price model.

Suggested Citation

  • Steve Gibbons, 2003. "Paying for Good Neighbours: Estimating the Value of an Implied Educated Community," Urban Studies, Urban Studies Journal Limited, vol. 40(4), pages 809-833, April.
    • Handle: RePEc:sae:urbstu:v:40:y:2003:i:4:p:809-833
    DOI: 10.1080/0042098032000065317
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    References listed on IDEAS

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    Cited by:

    1. Gibbons, Stephen & Machin, Stephen & Silva, Olmo, 2013. "Valuing school quality using boundary discontinuities," Journal of Urban Economics, Elsevier, vol. 75(C), pages 15-28.
    2. Luisa Gagliardi & Teresa Schlüter, 2015. "The Role of Education for Amenity Based Sorting in British Cities," SERC Discussion Papers 0184, Centre for Economic Performance, LSE.
    3. Xiaoping Zhou & Tong Lei & Yuyao Wang & Tianzheng Zhang & Yingjie Zhang & Yan Song & Yingxiang Zeng, 2022. "The spillover effect of senior neighbors on housing prices: Evidence from Beijing, China," Growth and Change, Wiley Blackwell, vol. 53(4), pages 1783-1812, December.
    4. Valeria Saiu, 2020. "Evaluating Outwards Regeneration Effects (OREs) in Neighborhood-Based Projects: A Reversal of Perspective and the Proposal for a New Tool," Sustainability, MDPI, vol. 12(24), pages 1-16, December.
    5. Oddbjørn Raaum & Kjell G. Salvanes & Erik O. Sørensen, 2006. "The Neighbourhood is Not What it Used to be," Economic Journal, Royal Economic Society, vol. 116(508), pages 200-222, January.
    6. Bo-sin Tang & Kwan To Wong, 2020. "Assessing externality: Successive event studies on market impacts of new housing development on an old residential neighbourhood," Environment and Planning B, , vol. 47(1), pages 156-173, January.
    7. Ham, Yun-Ju & Maddison, David J. & Elliott, Robert J.R., 2013. "The valuation of landfill disamenities in Birmingham," Ecological Economics, Elsevier, vol. 85(C), pages 116-129.
    8. Stephen Gibbons & Stephen Machin, 2008. "Valuing school quality, better transport, and lower crime: evidence from house prices," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 24(1), pages 99-119, spring.

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