The Price Elasticity of Housing Demand in Britain: Issues of Sample Selection

Abstract This paper contains estimates of the price and income elasticities of housing demand for six British conurbations. Using 1988/1989 data from the Joseph Rowntree Foundation Housing Finance Survey, the estimates are derived from a hedonic house price equation. Consideration is given to the possibility of sample selection bias. The price elasticity estimates are found to be robust with respect to alternative specifications and corrections for sample selection bias. However, there is clear evidence of sample selection bias and the effect of this is most clearly seen in the estimates of income elasticity which increase when allowance for bias is made.

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