Price and income elasticities of demand for housing characteristics in the city of Barcelona

Abstract

In this paper we estimate price and income elasticities of demand for a series of housing characteristics (quantity, quality and location) using the information contained in four cross sections of properties appraised in the city of Barcelona in the period 1998-2001. To do so we employ the two-stage approach proposed by Rosen (1974), estimating hedonic price equations for different districts in order to subsequently estimate the corresponding demand equations of various characteristics. The results allow us to analyse the complementarity or substitutability relationships among the characteristics analysed, and also to catalogue these characteristics as goods, according to the income elasticities obtained. By knowing the price, cross and income elasticities of housing characteristics we can make policy recommendations about the type of housing units which are the most desirable to be subsidized.