Technological Progress in a Model of the Housing - Land Cycle
A stationary-state perfect foresight model is developed in which housing and land are treated as investment assets convertible to each other at some costs. Investors hold either land or housing and are heterogeneous in the i. i. d idiosyncratic shocks to their conversion costs in every time period. Hence, there are endogenously determined probabilities that a unit of land will be converted to housing ("construction probability") in any given time period. This model is used to analyze the effects of a decrease in construction cost on the asset prices of land and housing, on housing rent and on the stationary stocks of land and housing. A decrease in construction cost always raises land value, that may either raise or lower housing values and increases both the construction and the demolition probabilities. The housing stock increases (decreases) if the construction probability increases proportionally more (less) than the demolition probability. Since housing rent is inversely related to the stock of housing, the fall in construction costs may cause rents to rise. Thus paradoxically, technological progress may hurt renters. The moral of the model is important: in contrast to models of the housing market without land or to models of the housing market without land or to models in which land price is exogenous, the long run supply price of housing is not fully determined by construction cost, but depends as well on demolition cost and on the endogenous value of the land.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:eee:juecon:v:34:y:1993:i:2:p:186-206. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.