Empirical Tools of Public
Finance
homes built closer to the city are smaller, or that they have
smaller yards. This would lead their value to be lower, so
that when one compared the prices of houses farther away
and closer to the city, one might not find the expected
decline in prices for farther -away homes. In the Boston metropolitan
area, for example, the town of Everett is on average
only 4 miles from downtown Boston, while the suburban
town of Lexington is 11 miles away. Yet the average home
price in Everett is $322,923, while the average home price
in Lexington is about 2.3 times higher at $746,804.9 This is
because the houses in Lexington are typically much larger
and have nicer attributes than those in Everett.