Migration, Capital Formation, and House Prices
AbstractWe investigate the effects of interregional labor market integration in a two-sector, overlapping-generations model with land-intensive production in the non-tradable goods sector (housing). To capture the response to migration on housing supply, capital formation is endogenous, assuming that firms face capital adjustment costs. Our analysis highlights heterogeneous welfare effects of labor market integration. Whereas individuals without residential property lose from immigration due to increased housing costs, landowners may win. Moreover, we show how the relationship between migration and capital formation depends on initial conditions at the time of labor market integration. Our model is also capable to explain the reversal of migration during the transition to the steady state, like observed in East Germany after unification in 1990. It is also consistent with a gradually rising migration stock and house prices in high-productivity countries like Switzerland.
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Bibliographic InfoPaper provided by Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland in its series FSES Working Papers with number 441.
Date of creation: 21 Feb 2013
Date of revision:
Other versions of this item:
- Grossmann, Volker & Schäfer, Andreas & Steger, Thomas M., 2013. "Migration, capital formation, and house prices," Working Papers 116, University of Leipzig, Faculty of Economics and Management Science.
- Grossmann, Volker & Schäfer, Andreas & Steger, Thomas M., 2013. "Migration, Capital Formation, and House Prices," IZA Discussion Papers 7225, Institute for the Study of Labor (IZA).
- Volker Grossmann & Andreas Schäfer & Thomas Steger, 2013. "Migration, Capital Formation, and House Prices," CESifo Working Paper Series 4146, CESifo Group Munich.
- D90 - Microeconomics - - Intertemporal Choice and Growth - - - General
- F20 - International Economics - - International Factor Movements and International Business - - - General
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-16 (All new papers)
- NEP-DGE-2013-03-16 (Dynamic General Equilibrium)
- NEP-MIG-2013-03-16 (Economics of Human Migration)
- NEP-URE-2013-03-16 (Urban & Real Estate Economics)
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