Homeowner Preferences after September 11th, a Microdata Approach

46 Pages Posted: 20 Mar 2017

See all articles by Adam Nowak

Adam Nowak

West Virginia University

Juan Sayago-Gomez

Universidad ICESI

Date Written: March 10, 2017

Abstract

The existence of homeowner preferences - specifically homeowners’ preferences for neighbors - is fundamental to economic models of sorting. This paper investigates whether or not the terrorist attacks of September 11, 2001 (9/11) impacted on local preferences for Arab neighbors. We test for changes in preferences using a differences-in-differences framework in a hedonic pricing model. Relative to sales before 9/11, we find properties within 0.1 miles of an Arab homeowner sold at a 1.5% discount in the 180 days after 9/11. The results are robust to a number of specifications including time horizon, event date, distance, alternative ethnic groups, and the presence of nearby mosques. Previous research has shown price effects at neighborhood levels but has not identified effects at the micro or individual property level, and for good reason: most transaction level data sets do not include ethnic identifiers. Applying methods from the machine learning and biostatistics literature, we develop a binomial classifier using a supervised learning algorithm and identify Arab homeowners based on the name of the buyer. We train the binomial classifier using names from Summer Olympic Rosters for 221 countries during the years 1948-2012. We demonstrate the flexibility of our methodology and perform an interesting counterfactual by identifying Hispanic and Asian homeowners in the data; unlike the statistically significant results for Arab homeowners, we find no meaningful results for Hispanic and Asian homeowners following 9/11.

Keywords: house prices, ethnicity, homeowner preferences, terrorism, September 11th

JEL Classification: R21, R23, R31, J15

Suggested Citation

Nowak, Adam and Sayago-Gomez, Juan, Homeowner Preferences after September 11th, a Microdata Approach (March 10, 2017). Available at SSRN: https://ssrn.com/abstract=2937344 or http://dx.doi.org/10.2139/ssrn.2937344

Adam Nowak (Contact Author)

West Virginia University ( email )

PO Box 6025
Morgantown, WV 26506
United States

Juan Sayago-Gomez

Universidad ICESI ( email )

Calle 18 #122-135
A.A. 25608
Cali
Colombia

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