Ethnic segregation and heterogeneous preferences of homeowners for housing and neighbourhood characteristics. Evidence from the Netherlands

This paper examines ethnically differentiated preferences for neighbourhood ethnic composition among homeowners in the Netherlands. Borrowing from price hedonic theory, it tests a fully nonparametric empirical model of housing choice. We exploit rich neighbourhood-level administrative data linked to the 2009 'Dutch Housing and Living Survey'. The nonparametric analysis proceeds in two steps. First, housing prices are decomposed into attribute-specific 'implicit prices'. These price hedonic estimates indicate a significant negative effect of the percentage of non-western minority residents in a neighbourhood on housing prices. For the second step and using the recovered household preference parameters, the marginal willingness to pay for an increase in non-western minority neighbours is estimated. Our model predicts an average decrease in dwelling price of €697 for every 10 per cent increase in non-western neighbours. The paper finds evidence of assimilation with some homeowners of non-western migrant background having a negative willingness to pay for living next to more co-ethnic neighbours.