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Is Accra a superstar city ?

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  • Buckley, Robert M.
  • Mathema, Ashna S.

Abstract

A recent study of house price behavior in U.S. cities by Gyourko, Mayer, and Sinai (2006) raises questions about so-called superstar cities in which housing is so inelastically supplied that it becomes unaffordable, as higher-income families outbid residents. We consider the case of Accra, Ghana, in this light, estimating the elasticity of housing supply and discussing the implications for growth and income distribution. There is not a great deal of data available to examine trends in Accra, so our method is indirect. First, we use a variant of the traditional monocentric city model to calculate the elasticity of Accra's housing supply relative to those of other similarly-sized African cities. This suggests that housing supply responsiveness is much higher elsewhere. This muted supply responsiveness is consistent with the observed higher housing prices. Second, we estimate a number of traditional housing demand equations and reduced form equations. Placing a number of restrictions on the equations allows us to infer Accra's housing supply elasticity. Taken together, our approaches suggest that lower-income families in Accra have such poor housing conditions because the market is extremely unresponsive to demand.Although the outcomes we have traced-high housing prices and low quality-are not unusual relative to the other developed country superstar cities, they are extreme. The welfare costs are considerable, so much so that in addition to direct housing market effects, these policies also appear to have potentially significant implications for the achievement of more equitable growth.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4453.

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Date of creation: 01 Dec 2007
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Handle: RePEc:wbk:wbrwps:4453

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Keywords: Economic Theory&Research; Housing&Human Habitats; Banks&Banking Reform; Public Sector Management and Reform;

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  1. Yusuf, Shahid & Nabeshima, Kaoru & Wei Ha, 2007. "What makes cities healthy ?," Policy Research Working Paper Series 4107, The World Bank.
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Cited by:
  1. Charles Y. OKYERE & Yira YACOUBA & Dominik GILGENBACH, 2013. "The Problem Of Annual Occurrences Of Floods In Accra: An Integration Of Hydrological, Economic And Political Perspectives," Theoretical and Empirical Researches in Urban Management, Research Centre in Public Administration and Public Services, Bucharest, Romania, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 8(2), pages 45-79, May.
  2. Annez , Patricia Clarke & Linn, Johannes F., 2010. "An agenda for research on urbanization in developing countries : a summary of findings from a scoping exercise," Policy Research Working Paper Series 5476, The World Bank.

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