Neighborhood Affluence, School-Achievement Scores, and Housing Prices: Cross-Classified Hierarchies and HLM

The housing literature has traditionally employed hedonic price models to investigate the impact of house and neighborhood characteristics on housing prices. These models, however, are not necessarily equipped to take into account the cross-classified, hierarchical nature of housing markets. This paper employs a hierarchical linear model (HLM) to examine the impact that housing characteristics, neighborhood affluence, and school-achievement scores have on housing prices in a cross-classified setting within a single municipality. More specifically, this paper analyzes the impact that differences in affluence across neighborhoods and school-achievement scores across school zones have on the valuation of certain individual housing characteristics in particular and, through them, on housing prices in general.

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