The Pursuit of Health: A Spatiotemporal Equilibrium Model of Regional Health and Housing Values

Abstract

This paper examines the contribution of endogenous health to the heterogeneity of regional housing markets and investigates the potential transmission mechanism of health effects among regions. Applying panel data on U.S. Metropolitan Statistical Areas (MSAs), we develop and calibrate a spatial equilibrium model with overlapping generations of heterogeneous, mobile households in which housing market prices are affected by households’ choices, which are determined by health status. We document a positive relationship between regional health and housing values. The higher priced housing values in the “good” health region can be explained by the immigration of the young generation and higher expenditures on housing services. The health effect on the housing market in “good” health regions is amplified through the migration channel, which also yields more volatile market.

Keywords: Health, Regional Economics, Housing, Spatiotemporal Equilibrium Model, Migration

JEL Classification: I12, O18