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The Capitalization of Public Services and Amenities into Land Prices — Empirical Evidence from German Communities


  • I am grateful to Mandy Kriese for helping me with all the data. I am indebted to Thiess Büttner and Marcel Thum for helpful discussions. I also would like to thank Otto Reich and two IJURR referees for their very useful comments.


Applying the hedonic approach to land prices, this article investigates the capitalization of public services and pure amenities in a cross section of German communities. Possible spillover effects from neighboring municipalities are explicitly included in the analysis and prove to be of considerable importance. Estimates of the impacts of local attributes on land prices are obtained taking into account the spatial structure among unobserved variables. The results confirm that differences in land prices are largely attributable to local conditions and policies. This implies a significant degree of mobility as well as high estimation of local attributes on the part of German households.