The London School of Economics and Political Science Empirical Essays on Real Estate, Local Public Goods and Happiness: Evidence
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The London School of Economics and Political Science Empirical Essays on Real Estate, Local Public Goods and Happiness: Evidence from Beijing Wenjie Wu A thesis submitted to the Department of Geography and Environment of the London School of Economics for the degree of Doctor of Philosophy, London, October 2012 1 2 3 Declaration I certify that the thesis I have presented for examination for the PhD degree of the London School of Economics and Political Science is solely my own work. The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without my prior written consent. I warrant that this authorization does not, to the best of my belief, infringe the rights of any third party. I declare that my thesis consists of around 53293 words. 4 5 Abstract This thesis explores the real estate and happiness consequences of public investment in local public goods improvements by using unique micro-geographical data from Beijing; it focuses on the spatial variations in park amenity values, and on the impact of transport improvements on land prices and homeowners’ happiness. Despite intense public interest, little is known about these effects. This thesis aims to fill these gaps. First, I explore the impact and sources of variations of park proximities as capitalized into the residential land prices. This analysis, using geographically-coded data from Beijing, provides new insights on the ways in which land markets capitalize the values of proximity to parks and suggests that this is highly dependent on the parcel’s location and local contextual characteristics. Next, I examine the real estate consequence of public investment in transport improvements using a rich data set of vacant land parcels in Beijing. I use a multiple intervention difference-in-difference method to document opening and planning effects of new rail stations on prices for different land uses in affected areas versus unaffected areas. Residential and commercial land parcels receiving increased station proximity experience appreciable price premiums, but the relative importance of such benefits varies greatly over space and local demographics. Finally, I investigate the impact of transport improvements on happiness that altered the residence-station distance for some homeowners, but left others unaffected. My estimation strategy takes advantage of micro happiness surveys conducted before-and-after the building of new rail stations in 2008 Beijing. I deal with the potential concern about the endogeneity in sorting effects by focusing on “stayers” and using non-market housings with pre-determined locations. I find the significantly heterogeneity in the effects from better rail access on homeowners’ happiness with respect to different dimensions of residential environment. The welfare analysis results suggest strong social-spatial differentiations. In combination, the three papers of this thesis make important contributions to a growing literature on public infrastructure, land market and happiness. 6 7 Acknowledgment Many thanks to Steve Gibbons and Paul Cheshire for outstanding supervision, and to my family for love and support. Thanks also to Olmo Silva, Henry Overman, Brett Day, Francesca Cornaglia, Simona Iammarino, Mark Partridge, Marlon Boarnet, Guanpeng Dong, Wenzhong Zhang, Jie Fan, Fengjun Jin, Yaping Wang, Youqin Huang for helpful comments. I gratefully acknowledge the scholarship support from the London School of Economics and Political Science. Previous versions of the papers were presented at the following conferences: Annual Conference of European Real Estate Society (2012); International Workshop on Regional, Urban, and Spatial Economics in China (2012); Annual Conference of European Regional Science Association International (2011); International Conference on China’s Urban Transition and City Planning (2011); Annual Conference of Regional Science Association International-British and Irish Section (2011). In addition preliminary versions of these papers were discussed at seminars at the LSE, University of Glasgow, Peking University, and the Chinese Academy of Science. Thanks to participants and discussants for kindly suggestions. 8 9 Content I. Introduction .............................................................................................................. 15 1 Overview ............................................................................................................. 16 2 Background and motivation ....................................................................... 16 3 Research questions......................................................................................... 37 4 Highlight of paper 1 ....................................................................................... 39 5 Highlight of paper 2 ....................................................................................... 42 6 Highlight of paper 3 ....................................................................................... 45 7 Brief summary .................................................................................................. 49 II. Paper 1---Spatial Variations in Park Amenity Values: Evidence from Beijing ...................................................................................................................... 52 1 Introduction ........................................................................................................ 53 2 Literature review............................................................................................... 56 3 Model ................................................................................................................... 59 4 Data ....................................................................................................................... 67 5 Results .................................................................................................................. 69 6 Conclusion .......................................................................................................... 78 7 Appendix ............................................................................................................. 92 III. Paper 2---Does Public Investment Spur the Land Market?: Evidence from Transport Improvement in Beijing .............................. 93 1 Introduction ...................................................................................................... 94 10 2 Literature review ............................................................................................ 97 3 Data and Institutional Settings ............................................................... 101 4 Models................................................................................................................ 111 5 Results ............................................................................................................... 115 6 Conclusions ..................................................................................................... 125 IV. Paper 3---Does Better Rail Access Improve Homeowners’ Happiness?: Evidence Based on Micro Surveys in Beijing .............. 148 1 Introduction .................................................................................................... 149 2 Literature review .......................................................................................... 151 3 Institutional Settings and Data ............................................................... 153 4 Model ................................................................................................................. 166 5 Results ............................................................................................................... 171 6 Monetization................................................................................................... 178 7 Conclusions ..................................................................................................... 181 8 Appendix .......................................................................................................... 181 IV. Conclusion .......................................................................................................... 208 References ................................................................................................................. 213 11 List of Tables Table 1.1 Variable name, definition, and descriptive statistics ................................................................ 81 Table 1.2 Estimates of the OLS and LWR models .................................................................................. 82 Table 1.3 Mean park value using LWR model ........................................................................................ 83 Table 1.4 LWR estimates across different model specifications ............................................................. 84 Table 1.5 Pearson correlations of the estimated park proximity parameters ........................................... 85 Table 1.6 Spearman rank correlations of the estimated park proximity parameters ............................... 86 Table 1.7 Park elasticity distribution hypothesis tests ............................................................................. 87 Appendix Table 1.1 ANOVA test of LWR and OLS results in terms of modelling fit ............................ 92 Table 2.1 Effects of rail access on real property values: recent empirical studies