Apartment complexes in the Korean housing market: what are the benefits of agglomeration?
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The Korean government has codified a unique set of regulations that requires developers to provide certain types and sizes of community and commercial facilities in proportion to the number of housing units in an apartment complex, given the lack of public funds necessary to create a livable and self-sufficient environment. To answer the question of why large-scale apartment complexes have been popular in the Korean housing market, this study illuminates the agglomeration benefits resulting from the integration of community and commercial facilities in apartment complexes. Using hedonic regressions and causal mediation analysis, it concludes that the agglomeration benefits of apartment complexes associated with an increase in the size of both community and commercial facilities outweigh the congestion diseconomies caused by an increase in the number of housing units. This implies that the government’s intervention has made large-scale development of residential areas financially feasible without the use of public expenditure.
KeywordsKorean housing development Apartment complex Community and commercial facilities Agglomeration benefits Causal mediation analysis
This study was developed from the doctoral dissertation of Yang (2017), supervised by the late Professor Mack Joong Choi. The author expresses gratitude to two anonymous referees and the dissertation committee, Professor Seoung Hwan Suh, Euijune Kim, In Kwon Park, and Kyung-min Kim for their helpful and valuable comments.
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