Research On The Economic Mechanisms And Effects Of Local Public Goods’ Impacts On Residential Location Choice And Housing Price

A core area and hot topic in the fields of urban economics and housing economics is to understand how local public goods affect urban households’ residential location choices and housing prices in a city’s urban form. From the practical perspective, the strategy of “people-centered” “New Urbanization” proposed by the new central government also means that it is crucial for local governments to improve the city’s quality of life and sustainability by the effective and inclusive provision of local public goods and services. Therefore, from both academic and practical perspectives it is important to examine the economic mechanisms of local public goods’ impacts on residential location choices and housing prices, quantify the corresponding effects, and use those findings to support local governments’ demand-oriented urban planning and management policies.With thorough literature review, a two-dimensional analysis framework of “location choice- housing price response” is proposed, and empirical analysis is conducted under this framework using micro datasets of urban households, housing transactions and four types of local public goods in Beijing. Along the “location choice” dimension, discrete choice model is estimated to identify urban households’ preferences for local public goods and the preference heterogeneity across different household groups. Along the “housing price response” dimension, hedonic housing price model is estimated to identify the corresponding preferences, the differential preferences in homeownership and rental markets, and the effects of local public goods and their changes on the spatial variation and changes in housing prices and rents. It is worth mentioning that, the households’ preferences obtained from the “location choice” dimension help to understand the differential effects of local public goods on housing prices and rents. Based on all these empirical results, three urban planning and management policy evaluation methods are proposed, with the aim to provide quantitative decision supporting tools for city government’s provision and spatial allocation of residential land, local public goods and public housing projects.The main empirical findings are as follows. First, local public goods have significant impacts on urban households’ residential location choice behaviors, and their preferences vary significantly among different household groups. Second, the capitalization effects of local public goods in housing prices and rents are all statistically significant. Remarkable differentials exist in for-sale and rental markets, which can be explained by the micro mechanisms identified in residential location choice behaviors. Third, after partially addressing the endogeneity problems caused by omitted variables and self-seletion, the housing price and rent premiums from new subway stations and the removal of “urban villages” are still statistically significant.Based on the above empirical findings, this dissertation raises several policy implications for urban planning and management practices from three aspects. First, the role of market forces should be fully understood and respected when managing urban spatial growth, while public policy is also important to mitigate negative externalities. Second, urban planning and management policies related to local public goods should be carefully designed based on the real demand of urban residents. Third, such policies should consider both spatial efficiency and inclusive development in a city, and carefully balance the benefits and costs of different population groups.