DP14551 A World Divided: Refugee Centers, House Prices, and Household Preferences

Author(s): Martijn Dröes, Hans R.A. Koster
Publication Date: April 2020
Date Revised: May 2020
Keyword(s): House Prices, household preferences, Immigration, refugee centers
JEL(s): E02, O18, R31
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14551

Using detailed housing transactions data from the Netherlands over the period 1990-2015, we examine the disamenity effect associated with the opening of refugee centers (RCs). This effect captures a negative externality but also reflects the attitudes of incumbent households towards immigration. Using a differencein-differences methodology, we show that the opening of an RC decreases house prices within 2km by 3-6%. This effect has become stronger over the past decade and is correlated with the local share of nationalist, anti-immigration, votes. Using micro-data on home buyers' characteristics and employing a non-parametric hedonic pricing method, we identify households' individual preferences. The willingness to pay is more negative for larger RCs, suggesting stronger negative externalities. However, we also show that the willingness to pay of foreign-born households is more positive. This is indicative of a more positive attitude towards immigration. Overall, these results imply that when opening RCs, it is advisable to keep them relatively small and locate them in more ethnically diverse areas.