…and it manifests in housing markets:
The findings from this exercise indicate that the preference estimates derived from our dynamic approach differ substantially from estimates derived from a comparable static demand model. For example, the per-year willingness to pay to avoid a 10-percent increase in the number violent crimes per 100,000 population is $586 (in 2000 dollars), which is about seventy percent higher than the $344 recovered from a comparable static estimation procedure. In the case of air pollution, the corresponding differences are even larger ($296 from the dynamic model versus $73 from the static) though still in the same direction. In contrast, the per-year marginal willingness to pay for race (in particular, the preferences of whites for living in proximity to other whites) is $1,558 whereas the estimate from a naive static model is substantially higher at $1,973.
Amazing that the emphasis in the article is on how $1,558 is such a low number.
Among (lots of) other things, this indicates to me that hedonic research studies looking at the impact of arts development on real estate prices will need to control for race.