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Residential Investment and Economic Growth

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  • Yi Wen

    (Economics Department, Cornell University)

Abstract

The causal relationship between growth and fixed capital formation is reexamined. Our findings are in sharp contrast with the earlier findings by Blomstrom et al. (1996) that capital formation does not contribute to economic growth. However, our findings also reject the conventional wisdom represented by De Long and Summers (1991, 1992) that capital formation in the form of business equipment determines the rate of a country¡¯s economic growth. What we have found instead is that capital formation in the residential sector (housing) causes GDP growth, which in turn causes capital formation in the business sector (plant and equipment).

Suggested Citation

  • Yi Wen, 2001. "Residential Investment and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 2(2), pages 437-444, November.
    • Handle: RePEc:cuf:journl:y:2001:v:2:i:2:p:437-444
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    References listed on IDEAS

    as
    1. J. Bradford DeLong & Lawrence H. Summers, 1992. "Equipment Investment and Economic Growth: How Strong Is the Nexus?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 157-212.
    2. J. Bradford De Long & Lawrence H. Summers, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 445-502.
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    Cited by:

    1. Liu Hongyu & Yun W. Park & Zheng Siqi, 2002. "The Interaction between Housing Investment and Economic Growth in China," International Real Estate Review, Global Social Science Institute, vol. 5(1), pages 40-60.
    2. Richard K. Green & Bingbing Wang, 2015. "Housing Tenure and Unemployment," Working Paper 9474, USC Lusk Center for Real Estate.
    3. Jayaraman, Praveena & Gebremedhin, Tesfa G., 2013. "A Non-Spatial Analysis of the Role of Residential Real Estate Investment in the Economic Development of the Northeast Region of the United States," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143107, Southern Agricultural Economics Association.
    4. Jayaraman, Praveena & Lacombe, Donald J. & Gebremedhin, Tesfa, 2013. "A Spatial Analysis of the Role of Residential Real Estate Investment in the Economic Development of the Northeast Region of the United States," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150953, Agricultural and Applied Economics Association.
    5. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.
    6. Singh, Bhupal, 2023. "Housing prices and macroprudential policies: Evidence from microdata," Economic Systems, Elsevier, vol. 47(1).
    7. Wang, Chan, 2012. "A very preliminary survey on growth and development," MPRA Paper 39037, University Library of Munich, Germany.

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    More about this item

    Keywords

    Investment; Economic growth;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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