Migration, Capital Formation, and House Prices

Volker Grossmann, Andreas Schäfer and Thomas Steger

No 441, FSES Working Papers from Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland

Abstract: We investigate the effects of interregional labor market integration in a two-sector, overlapping-generations model with land-intensive production in the non-tradable goods sector (housing). To capture the response to migration on housing supply, capital formation is endogenous, assuming that firms face capital adjustment costs. Our analysis highlights heterogeneous welfare effects of labor market integration. Whereas individuals without residential property lose from immigration due to increased housing costs, landowners may win. Moreover, we show how the relationship between migration and capital formation depends on initial conditions at the time of labor market integration. Our model is also capable to explain the reversal of migration during the transition to the steady state, like observed in East Germany after unification in 1990. It is also consistent with a gradually rising migration stock and house prices in high-productivity countries like Switzerland.

Keywords: Capital formation; House prices; Land distribution; Migration; Welfare (search for similar items in EconPapers)
JEL-codes: D90 F20 O10 (search for similar items in EconPapers)
Pages: 40
Date: 2013-02-21
New Economics Papers: this item is included in nep-dge, nep-mig and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Migration, Capital Formation, and House Prices (2013)
Working Paper: Migration, Capital Formation, and House Prices (2013)
Working Paper: Migration, capital formation, and house prices (2013)
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