Housing Consumption Declines with Income in the Open‐City Model: Theory and Empirical Evidence

20 Pages Posted: 13 Nov 2017

See all articles by Yishen Liu

Yishen Liu

World Bank - Development Research Group (DECRG)

Date Written: November 2017

Abstract

This paper demonstrates that the standard urban model (SUM) has important, previously unknown, and rather counterintuitive predictions about the determinants of housing consumption in cities. For example, the SUM predicts that, as higher wages in the central business district prompt city growth, the housing space per household falls, that is, rising income is associated with falling housing consumption. Empirical testing using a specially constructed panel data set of U.S. cities, confirms this prediction. When city size, income, and housing price rise, housing space per household falls.

Suggested Citation

Liu, Yishen, Housing Consumption Declines with Income in the Open‐City Model: Theory and Empirical Evidence (November 2017). Journal of Regional Science, Vol. 57, Issue 5, pp. 884-903, 2017, Available at SSRN: https://ssrn.com/abstract=3069164 or http://dx.doi.org/10.1111/jors.12326

Yishen Liu (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
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Washington, DC 20433
United States

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