OVERLAPPING NEIGHBORHOODS AND HOUSING EXTERNALITIES

This paper explores the roles of distance and feedback in neighborhood effects. Conventional models employ positive feedback and feature neighborhoods that stand apart, like islands. When neighborhoods overlap a change in land use in one location can induce changes in land use across the city. Furthermore, equilibrium land use is unlikely to be symmetric. With negative feedback, indirect neighborhood effects can lead to comparative static changes in density and price that cycle. These cycles can reduce the ability of coarse zoning to achieve an optimum and can make measurement of neighborhood effects a difficult undertaking. © 1992.