Construction of a Spatial Housing Price Index by Estimating an Almost Ideal Demand System

The aim of this paper is to build, for the first time, a spatial housing price index for the Chilean communities. The first step is to recover hedonic prices of three housing attributes by estimating a mixed index model using a generalised method of moments (GMM) procedure. Second, a censored almost ideal demand system is estimated to build expenditures for every community and to compare them among different spatial units, while maintaining a constant utility level. Using micro data from the 2009 CASEN survey, we show that there are important differences in the expenditure of a consumer in Santiago to access the same level of welfare in another community in the country and there are important differences in housing prices among Chilean communities