Tuesday, December 20, 2022

Brothels reduce neighboring house prices in Amsterdam

 There are many reasons why communities object to prostitution, and it will not surprise you to learn that it reduces house prices in its immediate neighborhood.  Here's a  study that takes advantage of the closing of some brothels in Amsterdam:

Giambona, Erasmo, and Rafael P. Ribas. "Unveiling the Price of Obscenity: Evidence from Closing Prostitution Windows in Amsterdam." Journal of Policy Analysis and Management (2022).

Abstract: "Does legitimating sinful activities have a cost? This paper examines the relationship between housing demand and overt prostitution in Amsterdam. In our empirical design, we exploit the spatial discontinuity in the location of brothel windows created by canals, combined with a policy that forcibly closed some of the windows near these canals. To pin down their effect on housing prices, we apply a difference-in-discontinuity (DiD) estimator, which controls for the precise location of brothel windows and the effect of other policies and local developments. Our results show that the housing prices are discontinuous at the bordering canals, and this discontinuity nearly disappears after closures. The discontinuity is also found to decrease with the distance to brothels, disappearing after 300 yards. Our estimates indicate that homes right next to sex workers were 30 percent cheaper before the closures. This result seems unrelated to the presence of other businesses, such as bars and cannabis shops. Instead, the price discount is partly explained by petty crimes. However, 73 percent of the effect remains unexplained after controlling for many forms of crime and risk perception. Our findings suggest that households tend to be against the visible presence of sex workers and related nuisances, reaffirming their marginalization."

And here's the concluding paragraph:

"Overall, the legalization of prostitution can have social and economic benefits. However, our work suggests that even in a city where prostitution has been tolerated for centuries and is currently legalized, residents avoid living near brothels. This aversion results in sizable property value losses. The takeaway for policymakers is that social norms and related nuisances influence the marginalization of sex workers beyond any regulations attempting to legitimize their status."

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