Local buyers’ exclusion through price on the farmland market: a potential outcome approach

ABSTRACT

The influx of non-local buyers into the land market is commonly held responsible for the exclusion of local buyers through price. We study the seaside farmland market in Corsica. A massive price gap between non-local and local buyers is observed. To explore this gap, we rely on a treatment effect approach. We first estimate hedonic price models, while controlling for omitted variable bias using an innovative method. We go further and estimate a general potential outcome model which allows capturing observable and unobservable preference heterogeneity between buyers. We find that the price gap indeed reflects preference heterogeneity, suggesting market segmentation at work.

KEYWORDS:

• Local buyers’ exclusion
• potential outcome model
• price gap
• heterogeneous preferences

JEL CLASSIFICATION:

• R30
• C30

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ In French, the report is entitled Engagement territorial pour une politique du foncier et du logement, p. 43.

² Note that more recent data were not available.

³ We used the user-written Stata command psacalc provided by Oster (2017).

⁴ Note that the model is now non-linear, and the Oster (2017) approach no longer applies, which was confirmed by personal correspondence with E. Oster.

⁵ The command is implemented in Stata MP 15 as etregress.

⁶ The correlation between $nourb$ and $price$ is −0.01 and not significant.

⁷ The null hypothesis that ${\sigma }_0={\sigma }_1$ is unambiguously rejected (${\chi }^2(1)=51.46$, $p-value=0.000$).

⁸ Note that this reflects the greater variability in the sale price for non-local buyers compared to local buyers, see standard deviations in Table 2.