The Impact of the Crime Rate and Star Schools on House Prices: An Analysis of Spatial Dependence

This paper discusses the relationships among house prices and house characteristics, crime rates, and star schools. The analyzed data were collected from 12 administrative regions in Taipei city. The empirical results show that star schools have a significant positive impact on house prices; violent crime rates have a negative but not significant impact on house prices; and theft-type crime rates have a significant positive impact, contrary to expectations. We infer that the cause for this counter-intuitive finding may be the psychological burden, but may also be related to theft-type crime rates in commercial development areas. The results also reveal that using the spatial error model and the spatial lag model will modify overestimated parameters in the conventional OLS model.