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http://hdl.handle.net/2451/26370
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| Title: | Why Has House Price Dispersion Gone Up? |
| Authors: | Van Nieuwerburgh, Stijn
Weill, Pierre-Olivier |
| Issue Date: | 31-Oct-2006 |
| Series/Report no.: | FIN-06-010 |
| Abstract: | We investigate the 30 year increase in the level and dispersion of house
prices across U.S. metropolitan areas in a calibrated dynamic general
equilibrium island model. The model is based on two main assumptions:
households °ow in and out metropolitan areas in response to local
wage shocks, and the housing supply cannot adjust instantly because of
regulatory constraints. In our equilibrium, house prices compensate for
cross-sectional wage differences. Feeding in our model the 30 year
increase in cross-sectional wage dispersion that we document based on
metropolitan-level data, we generate the observed increase in house
price level and dispersion. The calibration also reveals that, while a
baseline level of regulation is important, a tightening of regulation by
itself cannot account for the increase in house price level and
dispersion: in equilibrium, workers °ow out of tightly regulated
towards less regulated metropolitan areas, undoing most of the price
impact of additional local supply regulations. Finally, the calibration
with increasing wage dispersion suggests that the welfare effects of
housing supply regulation are large. |
| URI: | http://hdl.handle.net/2451/26370 |
| Appears in Collections: | Finance Working Papers
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