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Land bubbles despite non-vanishing rents

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  • Toda, Alexis Akira

Abstract

Skeptics of rational land or housing bubbles have claimed that bubbles do not exist on the basis of the supposed stationarity in the rent yield (rent to price ratio), as a bubble implies a vanishing rent yield. To counter this claim, we present a simple model in which the housing rent yield is constant but a land bubble inevitably emerges nevertheless with economic growth. The confusion arises from not distinguishing the rent on the housing structure from the pure land rent.

Suggested Citation

  • Toda, Alexis Akira, 2025. "Land bubbles despite non-vanishing rents," Economics Letters, Elsevier, vol. 257(C).
    • Handle: RePEc:eee:ecolet:v:257:y:2025:i:c:s0165176525005452
    DOI: 10.1016/j.econlet.2025.112708
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    References listed on IDEAS

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    1. Olivier, Jacques, 2000. "Growth-Enhancing Bubbles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 133-151, February.
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    Keywords

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    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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