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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Alvin Murphy

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Working Papers

July 2011A Dynamic Model of Demand for Houses and Neighborhoods
with Patrick Bayer, Robert McMillan, Christopher Timmins: w17250
This paper develops a dynamic model of neighborhood choice along with a computationally light multi-step estimator. The proposed empirical framework captures observed and unobserved preference heterogeneity across households and locations in a flexible way. The model is estimated using a newly assembled data set that matches demographic information from mortgage applications to the universe of housing transactions in the San Francisco Bay Area from 1994- 2004. The results provide the first estimates of the marginal willingness to pay for several non-marketed amenities – neighborhood air pollution, violent crime and racial composition – in a dynamic framework. Comparing these estimates with those from a static version of the model highlights several important biases that arise when dynamic ...

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