A Slab in the Face

Abstract

The quality of newly constructed single-family houses is usually homogeneous in and heterogeneous between neighborhoods. Such quality-clustering will be caused by the variation of natural amenities throughout a suburban area. Clustering will be enforced if the quality of neighboring buildings increases the value of newly constructed ones. To disentangle the natural amenity effect and the neighborhood effect, we use data from Berlin and exploit that the endogenous effect was weakened during the socialist period. Our results show that the exogenous variation caused by buildings constructed during this period still causes lower quality new buildings in the East of the city.