Does Station Name Matter?: Rent Seeking Behavior and Its Impact on Housing Prices

Abstract

The purpose of this study is to investigate the effect of rent-seeking behavior for public goods on housing prices. To do so, we analyzed the case of renaming the Sinchoeon station to Jamsilsaenae station for the Seoul Metro Green line by applying the rent seeking theory and estimated the effect of the event on the housing prices of the affected neighborhood. The hedonic pricing model adopted by related studies does not produce unbiased estimates due to the endogeneity resulted from omitted variables including compounding macroeconomic variables. By developing a new dataset, we used the difference in differences regression method that produces more precise and unbiased estimates. Our results show that the housing prices affected by the renaming event increased by around 5% compared to those of non-affected neighborhood. Our analytical results can shed light on understanding related rent seeking behaviors for public goods provision.