Building the City Under Financial Frictions

David Gomtsyan

Review of Economic Dynamics, 2024, vol. 52, 70-83

Abstract: Weak financial institutions may affect developing countries due to slowing the much-needed construction process of residential housing. Using novel data collected from Nairobi, I document considerable heterogeneity in the construction duration of new residential buildings, with about 40% of buildings started in 2009 still unfinished in 2018. To understand the role of financial development in constructing residential housing, I develop a heterogeneous agent model with financial frictions in which households construct individual housing units. Counterfactual simulations show that improvements in credit provision can substantially speed up the expansion of the aggregate housing stock and increase the city's density by enabling the construction of taller buildings. The model also predicts that investments in incomplete structures emerge as an alternative savings vehicle in the absence of reliable savings accounts. (Copyright: Elsevier)

Keywords: Urban growth; Housing investment; Financial frictions (search for similar items in EconPapers)
JEL-codes: O16 O18 R12 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://dx.doi.org/10.1016/j.red.2023.12.002
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See https://www.sciencedirect.com/ for details.

Related works:
Software Item: Code and data files for "Building the City Under Financial Frictions" (2023)
Working Paper: Building the City Under Financial Frictions (2023)
Working Paper: Online Appendix to "Building the City Under Financial Frictions" (2023)
Working Paper: Building the City Under Financial Frictions (2022)
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:red:issued:23-113

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2023.12.002

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().