Improved Information Shock and Price Dispersion : A Natural Experiment in the Housing Market

This research employs data from a natural experiment to assess the effect of an improved price information shock on subsequent real estate transaction price dispersion. While transaction data in the Israeli real estate market had never been open to the public, in 2010 an Israeli court ordered the Israel Tax Authority to post all real estate transaction data on its website. We employ all housing transactions in the period prior and subsequent to this event to assess its effect on housing price dispersion. Results provide evidence of improved market efficiency as indicated by a significant decrease in the dispersion of quality-adjusted prices. Further, we find evidence that the information shock effect on price dispersion varies with household and market characteristics and further associates with increased welfare. Our findings thus support the market transparency argument for promoting economic efficiency and equity