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Housing In A Neoclassical Growth Model

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  • Lichao Cheng
  • Bin Li
  • Zhixiong Zeng

Abstract

We present evidence that in the USA, the relative price of housing exhibits secular growth and that its growth rate is a stationary series. The ratio of the value of house stock to either consumption or GDP is also stationary. We develop a two-sector neoclassical growth model with housing that is consistent with these facts. Among the long-run determinants of the growth of housing prices and housing stock per capita are factor intensities, rates of technological progress in both the housing and non-housing sectors, and the excess of population growth over land growth. We also study the model's transitional dynamics. Copyright 2010 The Authors. Journal compilation 2010 Blackwell Publishing Asia Pty Ltd

Suggested Citation

  • Lichao Cheng & Bin Li & Zhixiong Zeng, 2010. "Housing In A Neoclassical Growth Model," Pacific Economic Review, Wiley Blackwell, vol. 15(2), pages 246-262, May.
  • Handle: RePEc:bla:pacecr:v:15:y:2010:i:2:p:246-262
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    References listed on IDEAS

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    1. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    2. Baxter, Marianne, 1996. "Are Consumer Durables Important for Business Cycles?," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 147-155, February.
    3. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    4. Morris A. Davis, 2010. "housing and the business cycle," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
    5. Davis, Morris A. & Heathcote, Jonathan, 2007. "The price and quantity of residential land in the United States," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2595-2620, November.
    6. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-362, June.
    7. Charles Ka Yui Leung, 2003. "Economic Growth And Increasing House Prices," Pacific Economic Review, Wiley Blackwell, vol. 8(2), pages 183-190, June.
    8. Leung, Charles Ka Yui, 2001. "Relating International Trade to the Housing Market," Review of Development Economics, Wiley Blackwell, vol. 5(2), pages 328-335, June.
    9. 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.
    10. Jin, Yi & Zeng, Zhixiong, 2004. "Residential investment and house prices in a multi-sector monetary business cycle model," Journal of Housing Economics, Elsevier, vol. 13(4), pages 268-286, December.
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    Cited by:

    1. Kuang-Liang Chang & Nan-Kuang Chen & Charles Ka Yui Leung, 2013. "In the Shadow of the U nited S tates: The International Transmission Effect of Asset Returns," Pacific Economic Review, Wiley Blackwell, vol. 18(1), pages 1-40, February.
    2. repec:bla:pacecr:v:22:y:2017:i:3:p:273-275 is not listed on IDEAS
    3. Chakravarty, Sugato & Pylypiv, Mariya I., 2015. "The Role of Subsidization and Organizational Status on Microfinance Borrower Repayment Rates," World Development, Elsevier, vol. 66(C), pages 737-748.

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