Is a Municipal Boundary a Good Stratification Variable?

Many aspects of interrelations among urban units in a metropolis and their economic effects on the central city have been explored in research so far. Questioned in this context are the extent of dominance that one may attribute to the metropolis for goingson in surrounding towns and the effect of municipal boundaries on these cities' economic developments. The geographic structure of Israel's main metropolitan center is helpful in studying the economic importance of municipal boundaries because it facilitates comparison of developments in areas abutting both sides of the municipal border. The main purpose of the study is to determine the value of a municipal boundary as a stratification variable. To test this, a unique database, including wage and self-employed income and home-sale transactions data, is used, and Gini indices for income and home prices are estimated and deconstructed using the ANOGI method. The following is found: the municipal boundary of the economic-activity center is losing its acuity over time, in terms of both income and income inequality. Contrastingly, the boundary is a good stratification variable for home prices and their inequality index. The inequality index is higher for income than for home prices. Some of the difference in home prices among groups in geographically adjacent areas originates in measured variance in the characteristics of the areas ("explained difference"). However, an "unexplained difference"-possibly stemming from areaspecific characteristics such as the quality of public services, level of taxation, and reputation-also has a considerable effect on the difference in housing prices.