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Housing Markets and Vacant Land

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Author Info

  • Keuschnigg, Christian

    (Institute for Advanced Studies, Vienna and Centre for Economic Policy Research)

  • Nielsen, Soren Bo

    (Economic Policy Research Unit)

Abstract

The paper examines land use in an urban zone. We propose a partial equilibrium model of housing markets with both vacant and built up land. The existing literature assumes building decisions to be irreversible and treats any given stock of vacant land as an exhaustible resource. By way of contrast, we argue that vacant land is built upon in finite time rather than asymptotically, and reduces to a temporary phenomenon only. When housing stocks depreciate, previously built up land is released and may be rebuilt at any structural intensity dictated by the going market conditions. The continued replacement of existing structures allows to adjust the average structural intensity in the city even if all land is built upon. We explain analytically the long-run equilibrium with full land use and demonstrate numerically that vacant land may still be an important transitional phenomenon. In particular, we emphasize the implication for land prices.

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File URL: http://www.ihs.ac.at/publications/eco/es-1.pdf
File Function: First version, 1994
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Bibliographic Info

Paper provided by Institute for Advanced Studies in its series Economics Series with number 1.

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Length: 23 pages
Date of creation: Dec 1994
Date of revision:
Handle: RePEc:ihs:ihsesp:1

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References

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  1. Harvey S. Rosen, 1983. "Housing Subsidies: Effects on Housing Decisions, Efficiency, and Equity," NBER Working Papers 1161, National Bureau of Economic Research, Inc.
  2. Guillermo A. Galvo & Laurence J. Kotlikoff & Carlos Alfredo Rodriguez, 1978. "The Incidence of a Tax on Pure Rent: A New Reason for an Old Answer," UCLA Economics Working Papers 125, UCLA Department of Economics.
  3. Sinn, Hans-Werner, 1986. "Vacant land and the role of government intervention," Regional Science and Urban Economics, Elsevier, vol. 16(3), pages 353-357, August.
  4. Goulder, Lawrence H., 1989. "Tax policy, housing prices, and housing investment," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 281-304, May.
  5. Feldstein, Martin S, 1977. "The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 349-60, April.
  6. Turnovsky, Stephen J. & Okuyama, Toshiyuki, 1994. "Taxes, housing, and capital accumulation in a two-sector growing economy," Journal of Public Economics, Elsevier, vol. 53(2), pages 245-267, February.
  7. N. Gregory Mankiw & David N. Weil, 1988. "The Baby Boom, The Baby Bust, and the Housing Market," NBER Working Papers 2794, National Bureau of Economic Research, Inc.
  8. Firouz Gahvari, 1985. "Taxation of Housing, Capital Accumulation, and Welfare: a Study in Dynamic Tax Reform," Public Finance Review, , vol. 13(2), pages 132-160, April.
  9. repec:fth:harver:1424 is not listed on IDEAS
  10. Capozza, Dennis & Li, Yuming, 1994. "The Intensity and Timing of Investment: The Case of Land," American Economic Review, American Economic Association, vol. 84(4), pages 889-904, September.
  11. Lawrence H. Goulder, 1989. "Tax Policy, Housing Prices, and Housing Investment," NBER Working Papers 2814, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Elias Oikarinen, 2009. "Dynamic linkages between housing and lot prices: Empirical evidence from Helsinki," Discussion Papers 53, Aboa Centre for Economics.
  2. Luis H.R. Alvarez & Jukka Lempa & Elias Oikarinen, 2009. "Do Standard Real Option Models Overestimate the Required Rate of Return of Real Estate Investment Opportunities?," Discussion Papers 52, Aboa Centre for Economics.

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