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  • Joseph Gyourko
  • Christopher Mayer
  • Todd Sinai

Abstract

We document large long-run differences in average house price appreciation across metropolitan areas over the past 50 years, and show they can be explained by an inelastic supply of land in some unique locations combined with an increasing number of highincome households nationally. The resulting high house prices and price-to-rent ratios in those "superstar" areas crowd out lower income households. The same forces generate a similar pattern among municipalities within a metropolitan area. These facts suggest that disparate local house price and income trends can be driven by aggregate demand, not just changes in local factors such as productivity or amenities.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.5.4.167
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File URL: http://www.aeaweb.org/aej/pol/ds/november2013/2012-0082_ds.zip
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 5 (2013)
Issue (Month): 4 (November)
Pages: 167-99

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Handle: RePEc:aea:aejpol:v:5:y:2013:i:4:p:167-99

Note: DOI: 10.1257/pol.5.4.167
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References

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  1. Edward L. Glaeser & Jose A. Scheinkman & Andrei Shleifer, 1995. "Economic Growth in a Cross-Section of Cities," NBER Working Papers 5013, National Bureau of Economic Research, Inc.
  2. Stijn Van Nieuwerburgh & Pierre-Olivier Weill, 2006. "Why Has House Price Dispersion Gone Up?," NBER Working Papers 12538, National Bureau of Economic Research, Inc.
  3. Blomquist, Glenn C & Berger, Mark C & Hoehn, John P, 1988. "New Estimates of Quality of Life in Urban Areas," American Economic Review, American Economic Association, vol. 78(1), pages 89-107, March.
  4. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2006. "The Polarization of the U.S. Labor Market," NBER Working Papers 11986, National Bureau of Economic Research, Inc.
  5. Todd Sinai & Nicholas S. Souleles, 2005. "Owner-occupied housing as a hedge against rent risk," Working Papers 05-10, Federal Reserve Bank of Philadelphia.
  6. Edward L. Glaeser & Joseph Gyourko, 2002. "The Impact of Zoning on Housing Affordability," Harvard Institute of Economic Research Working Papers 1948, Harvard - Institute of Economic Research.
  7. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December.
    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
    • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  8. Edward L. Glaeser & Joseph Gyourko & Raven Saks, 2005. "Why Have Housing Prices Gone Up?," NBER Working Papers 11129, National Bureau of Economic Research, Inc.
  9. Joel Waldfogel, 1999. "Preference Externalities: An Empirical Study of Who Benefits Whom in Differentiated Product Markets," NBER Working Papers 7391, National Bureau of Economic Research, Inc.
  10. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
  11. Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
  12. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
  13. Edward L. Glaeser & Joseph Gyourko, 2001. "Urban Decline and Durable Housing," Harvard Institute of Economic Research Working Papers 1931, Harvard - Institute of Economic Research.
  14. Edward L. Glaeser & Joseph Gyourko & Raven Saks, 2003. "Why is Manhattan So Expensive? Regulation and the Rise in House Prices," Harvard Institute of Economic Research Working Papers 2020, Harvard - Institute of Economic Research.
  15. Gyourko, Joseph & Tracy, Joseph, 1991. "The Structure of Local Public Finance and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 774-806, August.
  16. Jesse M. Shapiro, 2005. "Smart Cities: Quality of Life, Productivity, and the Growth Effects of Human Capital," NBER Working Papers 11615, National Bureau of Economic Research, Inc.
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  18. Ortalo-Magné, François & Rady, Sven, 2005. "Heterogeneity within Communities: A Stochastic Model with Tenure Choice," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 49, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  19. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August.
  20. repec:fth:stanho:e-95-4 is not listed on IDEAS
  21. Joseph Gyourko & Albert Saiz, 2006. "Construction Costs And The Supply Of Housing Structure," Journal of Regional Science, Wiley Blackwell, vol. 46(4), pages 661-680.
  22. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1253-1296, August.
  23. Lee, Sanghoon, 2010. "Ability sorting and consumer city," Journal of Urban Economics, Elsevier, vol. 68(1), pages 20-33, July.
  24. François Ortalo-Magné & Andrea Prat, 2005. "The Political Economy of Housing Supply," Levine's Bibliography 122247000000000954, UCLA Department of Economics.
  25. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
  26. Meese Richard & Wallace Nancy, 1994. "Testing the Present Value Relation for Housing Prices: Should I Leave My House in San Francisco?," Journal of Urban Economics, Elsevier, vol. 35(3), pages 245-266, May.
  27. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
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