Spatial Spillover in Housing Construction
This paper looks at the determinants of regional housing construction using Israeli panel data. We propose a simple model of regional housing markets in which people prefer to live where housing is cheaper and building contractors prefer to build in regions where housing is more expensive. We distinguish between relative profitability, which establishes a relationship between regional construction through regional house prices, and spatial spillovers. The latter may be induced, for example, by scale economies in which building costs in a region are affected by construction in neighboring regions, thereby inducing a spatial lag in building construction. We find that models are miss-specified unless they incorporate these spillovers. More specifically our results point to housing construction being locally cointegrated, and that local price elasticity of supply ranges from 0.45 â€“ 0.65. We also find substitution from neighboring regions and a strong national complementarity effect that offsets neighbor substitution. Finally, we look at policy complementarities between the public and private sectors in construction and find that public sector housing crowds-in private construction when share exceeds 8%.
When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa12p134. 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: (Gunther Maier)
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.