Distributional effects of nonresident investors on the housing market and welfare

Yin Germaschewski and Shu‐Ling Wang

Review of International Economics, 2021, vol. 29, issue 5, 1300-1326

Abstract: This paper studies the distributional effects of nonresident housing investment on residents' consumption and welfare in a dynamic stochastic general equilibrium model with two types of agents: savers and borrowers. The model is estimated with Bayesian methods applied to Taiwan. Three main results emerge. First, nonresident housing investment raises house prices and rent, validating policymakers' concerns about housing affordability. Second, higher house prices boost homeowners' property values, which strongly promotes consumption. Third, higher investment by nonresidents increases government tax revenues, the allocation of which has important welfare consequences across agents. Using tax revenues to subsidize residents through income tax reduction produces the largest welfare improvement, followed by a provision of public goods. Increasing the tax deductibility of mortgage interest is beneficial to borrowers, while allotting tax revenues to supply public capital results in the greatest welfare losses to savers.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/roie.12544

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:reviec:v:29:y:2021:i:5:p:1300-1326

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0965-7576

Access Statistics for this article

Review of International Economics is currently edited by E. Kwan Choi

More articles in Review of International Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().