The price and income elasticity of demand for small houses in Swedish municipalities.

The housing market is one of the most important markets for many economic agents. Large differences in the local market across Sweden suggest regional heterogeneity, however. This study aims to answer if the price and income elasticities of demand for small houses vary between different types of Swedish municipalities. This answer is explored in the light of the central place theory and location theory to see if they follow a hierarchal structure across space. To test this empirically, the 290 municipalities were grouped based on the Swedish Association of Local Authority and Regions’ definitions and tested group-wise using a log-log fixed-effect average hedonic price model using data for 2013-2020. The main findings indicate some differences in the estimates of price and income elasticities between different types of municipalities, but mixing results whether they follow a hierarchal relationship. The conclusions changes depending on which scale one measure, which indicate how local the housing market is.