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Flat Prices, Cell Phone Base Stations, and Network Structure: An Instrumental Variable Approach to Endogenous Locations

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  • Mense, Andreas
  • Wirth, Benjamin

Abstract

Following the critique of Pinkse & Slade (2010) and Gibbons & Overman (2012), we develop an instrument for the estimation of local price effects of cell phone base stations (CPBS) in an urban area. The instrument is derived from the spatial structure of the network and technical and regulatory requirements. Such a strategy could be useful in other contexts in which location choice is endogenous but depends on an existing network structure. We find a significantly negative impact of nearby CPBS on flat prices. The discount amounts to 3.3% of a property s value when two similar flats at distances of 50 and 100 m to the nearest CPBS are compared. The small difference between OLS and IV results suggests that the distance to the nearest CPBS is not endogenous, in opposition to Brandt & Maennig (2012).

Suggested Citation

  • Mense, Andreas & Wirth, Benjamin, 2014. "Flat Prices, Cell Phone Base Stations, and Network Structure: An Instrumental Variable Approach to Endogenous Locations," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100618, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc14:100618
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    JEL classification:

    • R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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