Interjurisdictional housing prices in locational equilibrium

Holger Sieg, V. Kerry Smith, H. Spencer Banzhaf, Randy Walsh

Research output: Contribution to journalArticlepeer-review

70 Scopus citations


In this study, we discuss how to construct interjurisdictional housing price indexes that are consistent with locational equilibrium theory. In theoretical models, housing is assumed to be homogeneous, which provides problems in empirical analysis. We provide conditions that allow us to treat heterogeneous housing as if it were homogeneous. The same conditions that allow us to develop a quantity index for housing, also imply that we can estimate interjurisdictional housing price indexes using hedonic price regressions. Locational equilibrium models impose a number of restrictions regarding the co-movement of housing price indexes, local public goods, and mean income levels. We propose to use these properties of locational equilibrium models to evaluate the different price index estimates. We estimate a variety of price indexes using a unique panel data set of housing transactions in Southern California. Our empirical results, by and large, support our approach.

Original languageEnglish (US)
Pages (from-to)131-153
Number of pages23
JournalJournal of Urban Economics
Issue number1
StatePublished - 2002


  • Aggregation
  • Empirical analysis
  • Housing prices
  • Interjurisdictional sorting
  • Locational equilibrium
  • Price index

ASJC Scopus subject areas

  • Economics and Econometrics
  • Urban Studies


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