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Melting pot or salad bowl: Cultural distance and housing investments
Author(s) -
Deng Yongheng,
Hu Maggie R.,
Lee Adrian D.
Publication year - 2021
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.12311
Subject(s) - hofstede's cultural dimensions theory , ethnic group , preference , database transaction , similarity (geometry) , investment (military) , geographical distance , economics , transaction data , cultural diversity , sociology , economic geography , marketing , business , microeconomics , politics , political science , social science , anthropology , demography , image (mathematics) , population , artificial intelligence , computer science , law , programming language
This paper investigates whether individuals’ cultural background affects their housing investment decisions, drawing inferences from property location choices, and transaction prices in Australia. We propose a novel measure of cultural distance for each homebuyer–neighborhood pair, adopting the six‐dimensional cultural framework of Hofstede. Our measure captures interethnicity similarity and thus measures the cultural similarity of each buyer and neighborhood pair at a more granular level. Utilizing housing transaction data of a culturally diverse city Sydney, Australia, we find that buyers are more likely to buy properties in neighborhoods with a shorter cultural distance to their culture of origin and are willing to pay a premium for properties in those locations, consistent with buyers’ preference for cultural proximity. Further, we show that cultural proximity preference is stronger for ethnicities from recent migration waves, particularly Asia. Our findings are generalizable to other regions with ethnic aggregations and offer new insights into the growing literature on culture and household finance as well as the urban economics literature.