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Estimating the housing production function with unobserved land heterogeneity

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  • Yusuke Adachi

Abstract

This paper develops a novel method for estimating the housing production function that addresses transmission bias caused by unobserved heterogeneity in land productivity. The approach builds on the nonparametric identification strategy of Gandhi et al. (2020) and exploits the zero-profit condition to allow consistent estimation even when either capital input or housing value is unobserved, under the assumption that land productivity follows a Markov process. Monte Carlo simulations demonstrate that the estimator performs well across a variety of production technologies.

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  • Yusuke Adachi, 2025. "Estimating the housing production function with unobserved land heterogeneity," Papers 2504.20429, arXiv.org.
    • Handle: RePEc:arx:papers:2504.20429
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    References listed on IDEAS

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    1. John F. McDonald, 1979. "An Empirical Test of a Theory of the Urban Housing Market," Urban Studies, Urban Studies Journal Limited, vol. 16(3), pages 291-297, October.
    2. Dennis Epple & Brett Gordon & Holger Sieg, 2010. "A New Approach to Estimating the Production Function for Housing," American Economic Review, American Economic Association, vol. 100(3), pages 905-924, June.
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