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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.

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
    DOI: 10.1111/j.1468-0106.2010.00500.x
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    References listed on IDEAS

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    1. Morris A. Davis, 2010. "housing and the business cycle," The New Palgrave Dictionary of Economics,, Palgrave Macmillan.
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    7. 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.
    8. 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.
    9. Charles Ka Yui Leung, 2003. "Economic Growth And Increasing House Prices," Pacific Economic Review, Wiley Blackwell, vol. 8(2), pages 183-190, June.
    10. 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.
    11. 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.
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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. Charles Ka Yui Leung, 2017. "Special issue on housing and financial stability: An introduction," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 273-275, August.
    3. William W. Chow & Michael K. Fung, 2021. "The effects of macroprudential policy on Hong Kong’s housing market: a multivariate ordered probit-augmented vector autoregressive approach," Empirical Economics, Springer, vol. 60(2), pages 633-660, February.
    4. Saha, Anuradha, 2023. "Land and housing: The twin forces of non-balanced growth," Journal of Macroeconomics, Elsevier, vol. 76(C).
    5. 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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