A New Approach to Estimating the Production Function for Housing

American Economic Review, Vol. 100, No. 3, pp. 905-924, 2010

36 Pages Posted: 16 Nov 2011 Last revised: 10 Mar 2017

See all articles by Dennis Epple

Dennis Epple

Carnegie Mellon University; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Brett R. Gordon

Northwestern University - Kellogg School of Management

Holger Sieg

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 1, 2010

Abstract

Dating to the classic works of Alonso, Mills, and Muth, the production function for housing has played a central role in urban economics and local public finance. This paper provides a new flexible approach for estimating the housing production function which treats housing quantities and prices as latent variables. The empirical analysis is based on a comprehensive database of recently built properties in Allegheny County, Pennsylvania. We find that the new method proposed in this paper works well in the application and provides reasonable estimates for the underlying production function.

Suggested Citation

Epple, Dennis and Gordon, Brett R. and Sieg, Holger, A New Approach to Estimating the Production Function for Housing (June 1, 2010). American Economic Review, Vol. 100, No. 3, pp. 905-924, 2010. Available at SSRN: https://ssrn.com/abstract=1959733

Dennis Epple

Carnegie Mellon University ( email )

Tepper School of Business
Pittsburgh, PA 15213-3890
United States
412-268-1536 (Phone)
412-268-7357 (Fax)

National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Munich, DE-81679
Germany

Brett R. Gordon (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2211 Campus Drive
Evanston, IL 60208
United States

Holger Sieg

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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