Abstract

http://ssrn.com/abstract=923472
 
 

References (44)



 
 

Citations (26)



 


 



Why Has House Price Dispersion Gone Up?


Stijn Van Nieuwerburgh


New York University Stern School of Business, Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Pierre-Olivier Weill


University of California, Los Angeles; National Bureau of Economic Research (NBER)

August 2006


Abstract:     
We investigate the 30-year increase in the level and dispersion of house prices across U.S. metropolitan areas in a calibrated dynamic general equilibrium island model. The model is based on two main assumptions: households flow in and out of metropolitan areas in response to local wage shocks, and the housing supply cannot adjust instantly because of regulatory constraints. Feeding in our model the 30-year increase in cross-sectional wage dispersion that we document based on metropolitan-level data, we generate the observed increase in house price level and dispersion. In equilibrium, workers flow towards exceptionally productive metropolitan areas and drive house prices up. The calibration also reveals that, while a baseline level of regulation is important, a tightening of regulation by itself cannot account for the increase in house price level and dispersion: in equilibrium, workers flow out of tightly regulated metropolitan areas towards less regulated areas, undoing most of the price impact of additional local supply regulations. Finally, the calibration with increasing wage dispersion suggests that the welfare effects of housing supply regulation are large.

Number of Pages in PDF File: 53

Keywords: house price, income inequality, supply regulation

JEL Classification: R13, R21, R31, R52, J61, E60

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Date posted: August 10, 2006  

Suggested Citation

Van Nieuwerburgh, Stijn and Weill, Pierre-Olivier, Why Has House Price Dispersion Gone Up? (August 2006). Available at SSRN: http://ssrn.com/abstract=923472 or http://dx.doi.org/10.2139/ssrn.923472

Contact Information

Stijn Van Nieuwerburgh (Contact Author)
New York University Stern School of Business, Department of Finance ( email )
44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Pierre-Olivier Weill
University of California, Los Angeles ( email )
Box 951477
Los Angeles, CA 90095-1477
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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