Consistent Estimates of the Elasticity of Substitution between Land and Non-Land Inputs in the Production of Housing

J. OF URBAN ECONOMICS

Posted: 22 Nov 1996

See all articles by Paul Thorsnes

Paul Thorsnes

University of Otago - School of Business - Department of Economics

Abstract

This paper reports new estimates of the elasticity of substitution between land and non-land inputs in the production of housing. Errors in the measurement of land value may have biased existing estimates of the substitution elasticity downward, leading to the conclusion that the substitution elasticity is less than one. The data analyzed in this study consist of observations on the transaction prices of both the lot and house, obtained by tracking the development of residential subdivisions. The results indicate that the substitution elasticity is higher than indicated in previous studies, and may not differ significantly from one.

JEL Classification: R32

Suggested Citation

Thorsnes, Paul, Consistent Estimates of the Elasticity of Substitution between Land and Non-Land Inputs in the Production of Housing. J. OF URBAN ECONOMICS, Available at SSRN: https://ssrn.com/abstract=9180

Paul Thorsnes (Contact Author)

University of Otago - School of Business - Department of Economics ( email )

PO Box 56
Dunedin
New Zealand

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
557
PlumX Metrics