Housing Dynamics: Theory Behind Empirics

Ping Wang and Danyang Xie

MPRA Paper from University Library of Munich, Germany

Abstract: We construct a dynamic general equilibrium model of housing, incorporating some key features that bridge time and space. We model explicitly the evolution of housing structures/household durables and the separate role played by land, fully accounting for households’ locational choice decisions. Housing services derive positive utility, but are decayed away from the city center. Our model enables a full characterization of the dynamic paths of housing as well as housing and land prices. The model is particularly designed to be calibrated to fit some important stylized facts, including faster growth of housing structure/household durables than housing, faster growth of land prices than housing prices, a locationally steeper land rent gradient than the housing price gradient, and relatively flatter housing quantity and price gradients in larger cities with flatter population gradients. The calibrated model is then used to quantitatively assess the dynamic and spatial consequences of demand and supply shifts. We find that nonhomotheticity in forms of income-elastic spending on housing/household durables and minimum structure requirement in housing production are essential ingredients.

Keywords: Macro Housing; Locational Choice; Dynamic Spatial Equilibrium (search for similar items in EconPapers)
JEL-codes: D90 E20 O41 R13 (search for similar items in EconPapers)
Date: 2014-09-29
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Housing Dynamics: Theory Behind Empirics (2024)
Working Paper: Housing Dynamics: Theory Behind Empirics (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:59057

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