Template-type: ReDIF-Paper 1.0 Author-Name: Ong, Cheng Boon Author-Email: ong@merit.unu.edu Author-Workplace-Name: UNU-MERIT / MGSoG Author-Name: De Witte, Kristof Author-Email: k.dewitte@maastrichtuniversity.nl Author-Workplace-Name: Top Institute for Evidence Based Education Research, Maastricht University, and Faculty of Economics and Business, KU Leuven Title: Ethnic segregation and heterogeneous preferences of homeowners for housing and neighbourhood characteristics. Evidence from the Netherlands Abstract: This paper examines ethnically differentiated preferences for neighbourhood ethnic composition among homeowners in the Netherlands. Borrowing from price hedonic theory, it tests a fully nonparametric empirical model of housing choice. We exploit rich neighbourhood-level administrative data linked to the 2009 'Dutch Housing and Living Survey'. The nonparametric analysis proceeds in two steps. First, housing prices are decomposed into attribute-specific 'implicit prices'. These price hedonic estimates indicate a significant negative effect of the percentage of non-western minority residents in a neighbourhood on housing prices. For the second step and using the recovered household preference parameters, the marginal willingness to pay for an increase in non-western minority neighbours is estimated. Our model predicts an average decrease in dwelling price of €697 for every 10 per cent increase in non-western neighbours. The paper finds evidence of assimilation with some homeowners of non-western migrant background having a negative willingness to pay for living next to more co-ethnic neighbours. Classification-JEL: R20, R21, R23, R31, R32 Keywords: demand estimation, hedonic price, heterogeneous preference, nonparametric, generalized kernel function, ethnic segregation Series: UNU-MERIT Working Papers Creation-Date: 2013 Number: 061 File-URL: http://www.merit.unu.edu/publications/wppdf/2013/wp2013-061.pdf File-Format: application/pdf File-Size: 275 Kb Handle: RePEc:unm:unumer:2013061