After a Starbucks opens in town, housing prices rise

Finance


A hot topic in policy debates worldwide, gentrification is defined as the process of rebuilding homes and businesses accompanied by an influx of middle-class or affluent people at the expense of earlier, often poorer residents. One big issue is the lack of consistent data to determine the effects of the trend — positive or negative.

The Harvard economists said their study, the first of its kind using Yelp data, shows there are new, more accurate ways to analyze the emotional issue.

“Government data from statistical agencies such as the Bureau of Labor Statistics and Census Bureau have long been used by economists for analyzing policy and the economy — these data sources are invaluable but come with important limitations,” Michael Luca, an associate professor at HBS, told CNBC in an email.

The use of Yelp, Luca continued, compliments the existing data by providing real-time updates on local stores as well as an insight into how neighborhoods change during gentrification.

“Yelp data has the advantage of being more up to date than most official government statistics,” the economist added. “It also contains metrics on things like cuisine, prices, and ratings that can be difficult to observe otherwise.”

What remains uncertain, though, is any idea of causality, Glaeser wrote.

“Yet, it seems true that Yelp establishments from 2007-2011 predict changes in education levels over the next five years, but education from 2007 to 2011 does not predict increases in the number of Yelp establishments, once we control for the initial level of Yelp establishments.”

So Starbucks may not be causing gentrification, but its arrival may confirm the gentrification trend.

“The presence of a Starbucks is far less important than whether the community has people who consume Starbucks,” Glaeser writes in the paper. “Consequently, we think that this variable is likely to be a proxy for gentrification itself.”



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