A Spatiotemporal Equilibrium Model of Migration and Housing Interlinkages

94 Pages Posted: 16 Apr 2018 Last revised: 11 Apr 2022

See all articles by Wukuang Cun

Wukuang Cun

Shanghai University of Finance and Economics - Department of Finance

M. Hashem Pesaran

University of Southern California - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 9, 2018

Abstract

This paper develops and solves a spatiotemporal equilibrium model in which regional wages and house prices are jointly determined with location-to-location migration flows. The agent's optimal location choice and the resultant migration process are shown to be Markovian, with the transition probabilities across all location pairs given as non-linear functions of wage and housing cost differentials, endogenously responding to migration flows. The model can be used for the analysis of spatial distribution of population, income, and house prices, as well as for spatiotemporal impulse response analysis. The model is estimated on a panel of 48 mainland U.S. states and the District of Columbia using the training sample (1976-1999), and shown to fit the data well over the evaluation sample (2000-2014). The estimated model is then used to analyze the size and speed of spatial spill-over effects by computing spatiotemporal impulse responses of positive productivity and land-supply shocks to California, Texas, and Florida. Our simulation results show that states with a lower level of land-use regulation can benefit more from positive state-specific productivity shocks; and positive land-supply shocks are much more effective in states, such as California, that are subject to more stringent land-use regulations.

Keywords: location choice, joint determination of migration and house prices, spatiotemporal impulse responses, land-use deregulation, counterfactual exercise, population allocation, productivity and land supply shocks, California, Texas and Florida

JEL Classification: E0, R23, R31

Suggested Citation

Cun, Wukuang and Pesaran, M. Hashem, A Spatiotemporal Equilibrium Model of Migration and Housing Interlinkages (October 9, 2018). USC-INET Research Paper No. 18-08 (Revised), Available at SSRN: https://ssrn.com/abstract=3162399 or http://dx.doi.org/10.2139/ssrn.3162399

Wukuang Cun (Contact Author)

Shanghai University of Finance and Economics - Department of Finance ( email )

Shanghai, 200433
China

M. Hashem Pesaran

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall 300
Los Angeles, CA 90089
United States

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