Residential Construction: Using the Urban Growth Model to Estimate Housing Supply

Posted: 17 Jul 2000

See all articles by Christopher J. Mayer

Christopher J. Mayer

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

C. Tsuriel Somerville

University of British Columbia (UBC) - Division of Strategy and Business Economics

Abstract

This article presents an empirical model of housing supply derived from urban growth theory. This approach describes new housing construction as a function of changes in house prices and costs rather than as a function of the levels of those variables, which previous studies have used. Empirical tests support this specification over the leading alternative models. Our estimates show that a 10% rise in real prices leads to an 0.8% increase in the housing stock, which is accomplished by a temporary 60% increase in the annual number of starts, spread over four quarters.

JEL Classification: R31

Suggested Citation

Mayer, Christopher J. and Somerville, C. Tsuriel, Residential Construction: Using the Urban Growth Model to Estimate Housing Supply. Journal of Urban Economics, Vol. 48, No. 1, pp. 85-109, July 2000. Available at SSRN: https://ssrn.com/abstract=232647

Christopher J. Mayer (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

C. Tsuriel Somerville

University of British Columbia (UBC) - Division of Strategy and Business Economics ( email )

2053 Main Mall
Vancouver, British Columbia
Canada
604-822-8341 (Phone)
604-822-8351 (Fax)

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