Distant Shocks, Migration, and Housing Supply in India

48 Pages Posted: 6 Apr 2021 Last revised: 28 Feb 2023

See all articles by Arnab Dutta

Arnab Dutta

The University of Hong Kong - Department of Real Estate and Construction

Sahil Gandhi

The University of Manchester

Richard K. Green

University of Southern California - Lusk Center for Real Estate

Date Written: April 5, 2021

Abstract

This paper estimates urban India's housing supply elasticities using novel demand shifters. In a spatial equilibrium framework, we argue that droughts and highway infrastructure investments in one state affects housing demand in other states by inducing inter-state migration. A series of empirical tests confirm this hypothesis. Using district-level data from 2001 and 2011, we find that the elasticity of formal houses made of concrete is 1.62, slightly less than the national elasticity of 1.75 in the United States. The elasticity of informal houses made of grass, thatch, bamboo, etc., is -0.49. A negative supply elasticity of informal houses is consistent with the existence of urban gentrification through the demolition and upgradation of slums. And finally, the elasticity of vacant formal residential housing units' supply is estimated to be 2.62. We posit that a relatively higher vacant elasticity reflects speculative construction by developers in Indian cities during the 2000s.

Keywords: Housing, Migration, India

JEL Classification: J61, R23, R31

Suggested Citation

Dutta, Arnab and Gandhi, Sahil and Green, Richard K., Distant Shocks, Migration, and Housing Supply in India (April 5, 2021). Available at SSRN: https://ssrn.com/abstract=3820187 or http://dx.doi.org/10.2139/ssrn.3820187

Arnab Dutta

The University of Hong Kong - Department of Real Estate and Construction ( email )

Hong Kong
China

Sahil Gandhi (Contact Author)

The University of Manchester ( email )

Booth St West
Manchester, N/A M15 6PB
United Kingdom

Richard K. Green

University of Southern California - Lusk Center for Real Estate ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

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