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Does issuing building permits reduce the cost of land? An estimation based on the demand for building land in France

Jean-Sauveur Ay (), Jean Cavailhes (), Mohamed Hilal () and Julie Le Gallo ()
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Jean Cavailhes: CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux - INRA - Institut National de la Recherche Agronomique - AgroSup Dijon - Institut National Supérieur des Sciences Agronomiques, de l'Alimentation et de l'Environnement
Mohamed Hilal: CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux - INRA - Institut National de la Recherche Agronomique - AgroSup Dijon - Institut National Supérieur des Sciences Agronomiques, de l'Alimentation et de l'Environnement

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Abstract: While the aggregate value of constructed land rose from 45% to nearly 260% of gross domestic product in France between 1998 and 2006, stabilising after the crisis, regulatory constraints on construction are used to explain the rise in land prices, which are weighing on production costs for new housing units. We analyse to what extent the issuance of building permits reduces the price of land. We first propose a theoretical model for assigning heterogeneous households (in terms of preferences) to heterogeneous building plots (in terms of location) to study the effects of construction on the price of land. We then estimate the inverse demand for building land by instrumenting construction (quantity) by instrumental variables relating to the nature of the land, to its topography, to the agricultural opportunity cost and to the presence of industrial brownfields. A 1% increase in the number of permits issued resulted in a moderate decrease in land prices of 0.3%, on average. The effect, which differs according to the type of construction, increases with proximity to dense zones.

Keywords: politique foncière; artificialisation; modèle d’affectation; variables instrumentales (search for similar items in EconPapers)
Date: 2018
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01941282
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Published in Economie et Statistique / Economics and Statistics, INSEE, 2018, pp.45-67. ⟨10.24187/ecostat.2018.500t.1945⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01941282

DOI: 10.24187/ecostat.2018.500t.1945

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