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Bayesian Estimation of the Hierarchical SLX Model with an Application to Housing Markets

Author

Listed:
  • Joshua C. Hall

    (West Virginia University)

  • Donald J. Lacombe

    (Texas Tech University)

  • Amir Neto

    (Florida Gulf Coast University)

  • James Young

    (University of Washington)

Abstract

Hierarchical or multilevel models have long been used in hedonic models to delineate housing submarket boundaries in order to improve model accuracy. School districts are one important delineator of housing submarkets in an MSA. Spatial hedonic models have been extensively employed to deal with unobserved spatial heterogeneity and spatial spillovers. In this paper, we develop the spatially lagged X (or SLX) hierarchical model to integrate these two approaches to better understanding local housing markets. We apply the SLX hierarchical model to housing and school district test score data from Cincinnati Ohio. Our results highlight the importance of accounting for spatial spillovers and the fact that houses are embedded in school districts which vary in quality.

Suggested Citation

  • Joshua C. Hall & Donald J. Lacombe & Amir Neto & James Young, 2022. "Bayesian Estimation of the Hierarchical SLX Model with an Application to Housing Markets," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 46(2), pages 360-373, April.
    • Handle: RePEc:spr:jecfin:v:46:y:2022:i:2:d:10.1007_s12197-021-09568-2
    DOI: 10.1007/s12197-021-09568-2
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    References listed on IDEAS

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    More about this item

    Keywords

    Spatial econometrics; SLX model; Bayesian methods; Spatial hierarchical models;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • I29 - Health, Education, and Welfare - - Education - - - Other
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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