Housing, Land Prices, and Growth
Angus Deaton () and
Journal of Economic Growth, 2001, vol. 6, issue 2, 87-105
We consider the effects of land for housing on the growth process within an overlapping generations model. Our original interest was to enquire whether the introduction of land into a growth model might account for a "virtuous" circle in which saving-up for land (or housing) generates growth and higher land prices, generating further increases in saving, and so on. Such an account is sometimes proposed for high saving rates in East Asia, where mortgage markets are limited or absent. Our analysis does not support such a story. The user cost of land reduces the resources available for consumption of reproducible goods, so that the introduction of intrinsically valuable land into a growth model lowers the equilibrium stock of capital and raises the equilibrium interest rate. On the asset side, the presence of land causes life-cycle savings to be reallocated away from productive capital towards land. The social optimum in such a model is for land to be nationalized and provided at zero rent. Land markets, far from generating saving and growth, are inimical to capital formation. Copyright 2001 by Kluwer Academic Publishers
References: Add references at CitEc
Citations: View citations in EconPapers (26) Track citations by RSS feed
Downloads: (external link)
http://journals.kluweronline.com/issn/1381-4338/contents link to full text (text/html)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:jecgro:v:6:y:2001:i:2:p:87-105
Ordering information: This journal article can be ordered from
http://www.springer. ... th/journal/10887/PS2
Access Statistics for this article
Journal of Economic Growth is currently edited by Oded Galor
More articles in Journal of Economic Growth from Springer
Bibliographic data for series maintained by Sonal Shukla ().