The impact of automotive industry investments on local property prices – The case of Mercedes-Benz in Kecskemét (Hungary), 2010–2017
The impact of automotive industry investments on local property prices – The case of Mercedes-Benz in Kecskemét (Hungary), 2010–2017

Summary/Abstract: The automotive industry, being one of the largest industries worldwide, is a dominant and increasingly important sector across Europe. Due to the large foreign direct investment inflow from multinational automotive companies, it has special importance in the Central and Eastern European region. Owing to their sheer size, large-scale greenfield investment projects by multinational carmakers considerably affect macroeconomic output as well as regional social and economic development, including the housing market. This study explores whether a large-scale investment project can cause regional housing prices to deviate from national trends. Using a multivariate synthetic control method estimator, the authors identify the extent to which local house prices were influenced by the Mercedes-Benz car factory investment in Kecskemét, Hungary. The study compare the evolution of house prices in Kecskemét to a synthetic control of other county seats. The results suggest that following the completion of the Mercedes factory, local house prices increased by 39 percentage points more between 2010 and 2017 compared to the counterfactual case. The estimated effect is significant and large in magnitude compared to the pseudo-effects based on spatial placebo tests. Several robustness analyses confirm this conclusion.

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