Housing Economics

What is the impact of increased price information on the functioning of the housing market? Essi Eerola , together with Teemu Lyytikäinen, has studied the implications of new information for market outcomes in a theoretical framework so as to disentangle the potential channels through which information may be important. The results suggest that increased information leads to higher prices. The time on the market, in turn, may become longer or shorter depending on which side of the market reacts more to the new information. The authors utilised a Finnish policy intervention to estimate these effects. They opened a website with detailed information about individual housing transactions was opened. The website covered only part of the country, which allows the authors to use the differences-in-differences method to estimate the effect of increased information. The results show that increased information on past transactions led to higher prices and shorter times on the market. In the light of their theoretical results, the empirical evidence suggests that buyers react more to the new information than sellers.

Ms Eerola has co-authored numerous papers on housing economics such as: "Matching in the Housing Markets with Risk Aversion and Savings", "Is Social Housing Affordable?", "VAT, Housing and Redistribution" and "Housing Allowance and Rents: Evidence from a Stepwise Subsidy Scheme". Together with Ifo economist Panu Poutvaara, she authored a paper entitled: Citizens Should Vote on Secession (Topics in Economic Analysis and Policy, 4(1), 2004).

Essi Eerola is Principal Economist at the Government Institute for Economic Research (VATT) in Helsinki. She holds a PhD from the University of Helsinki.