NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Daniel Hartley

Federal Reserve Bank of Chicago
Economic Research Department
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NBER Working Papers and Publications

July 2010Endogenous Gentrification and Housing Price Dynamics
with Veronica Guerrieri, Erik Hurst: w16237
In this paper, we begin by documenting substantial variation in house price growth across neighborhoods within a city during city wide housing price booms. We then present a model which links house price movements across neighborhoods within a city and the gentrification of those neighborhoods in response to a city wide housing demand shock. A key ingredient in our model is a positive neighborhood externality: individuals like to live next to richer neighbors. This generates an equilibrium where households segregate based upon their income. In response to a city wide demand shock, higher income residents will choose to expand their housing by migrating into the poorer neighborhoods that directly abut the initial richer neighborhoods. The in-migration of the richer residents into these bord...

Published: Guerrieri, Veronica & Hartley, Daniel & Hurst, Erik, 2013. "Endogenous gentrification and housing price dynamics," Journal of Public Economics, Elsevier, vol. 100(C), pages 45-60. citation courtesy of

 
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