is there a double dividend from anti sprawl policies abstract this paper examines the welfare effects of anti sprawl policies such as development tax in a simple spatial explicit urban model with two market failures urban decline at the city core and underprovision of open space amenities at the urban fringe and pre existing distortionary property tax used to fund public services and improvements to mitigate urban decline consistent with prior double dividend literature there is a tax interaction effect that occurs between the development tax and the pre existing property tax however there are two fundamental differences between the tax interaction effect identified here and that of prior literature ours one has two components first there is a cost side tax interaction effect that is spatially concentrated at the urban fringe as only agents at the urban fringe alter their behavior in response to the development tax second there is also a benefit side tax interaction effect as increases in open space at the urban fringe are capitalized into housing prices throughout the city in contrast to prior literature we find that the empirical importance of the combined tax interaction effect is of substantially less importance and as a consequence the likelihood of a double dividend is higher than in prior studies further we show that the development tax should be part of the local tax system even in the absence of open space benefits

cost reduction competition and industry performance in many markets firms compete over time by expending resources with the purpose of reducing their costs sometimes the cost reducing investments operate directly on costs in many instances they take the form of developing new products that deliver what customers need more cheaply therefore product development can have the same ultimate effect as direct cost reduction in fact if one thinks of the product as the services it delivers to the customer in the way that lancaster pioneered then product development often is just cost reduction

cooperative and noncooperative r d in duopoly with spillovers contrary to the usual assumption made in most oligopoly models relations among firms are seldom of a wholly cooperative or noncooperative type in many situations they compete in some fields while they cooperate in others an important example is the case of cooperative research efforts bringing fierce competitors together two types of agreement are observed first r d cooperation can take place at the so called precompetitive stage companies share basic information and efforts in the r d stage but remain rivals in the market place 1 a second type of agreement involves an extended collusion between partners creating common policies at the product level the usual justifications of this extension are the difficulties of protecting intellectual property the idea is then to allow partners who have achieved inventions together to also control together the processes and products which embody the results of their collaboration in order to recuperate jointly their r d investments 2 what could be expected from these types of agreement is a reduction in r d expenditures because of less wasteful duplication and a reduction of total production because of more reprinted from the american economic review 78 5 1133 1137 1988 center for operations research econometrics 1348 louvain la neuve belgium we are grateful to jean

information transmission cournot and bertrand equilibria we examine how incentives for two duopolists to honestly share information change depending upon the nature of competition cournot or bertrand and the nature of the information structure while in earlier papers uncertainty is about an unknown common demand intercept in the present paper uncertainty is about unknown private costs the different information structure reverses the incentives to share information while with unknown common demand sharing is a dominant strategy with bertrand competition and concealing is a dominant strategy with cournot competition with unknown private costs sharing is a dominant strategy with cournot competition and concealing is a dominant strategy with bertrand competition

armington models and terms of trade effects some econometric evidence for north america elasticities of substitution among u s imports from mexico canada the rest of the world and competing domestic production are estimated for twenty two mining and manufacturing sectors based on quarterly data for 1980 88 these elasticities will provide a benchmark for computable general equilibrium models of north american trade liberalization the authors also find that estimated armington elasticities are low and therefore researchers may want to reconsider the device of using high values of armington elasticities in multicountry computable general equilibrium models to avoid large terms of trade losses associated with preferential trade liberalization

intraurban residential mobility the role of transactions costs market imperfections and household disequilibrium abstract this paper presents a model of household residential search and mobility that focuses on microeconomic elements of household behavior and incorporates housing market features the model is cast explicitly in terms of a rigorous model of housing demand allowing the benefits from moving to be measured as the compensating income variation of the potential change in consumption the empirical results indicate that large changes in economic variables such as income and prices produce only small potential gains from moving and that a major factor in the moving decision is the magnitude of search and moving costs

cournot oligopoly with information sharing this paper studies the incentives for information sharing among firms in a cournot oligopoly facing a linear uncertain demand and an affine conditional expectation information structure no information sharing is found to be the unique equilibrium in two cases in which the signals with equal precision are assumed indivisible and infinitely divisible however the nonpooling equilibrium converges to the situation where the pooling strategies are adopted as the amount of information increases hence the efficiency is achieved in the competitive equilibrium as the number of the firm become large

a microsimulation model of swedish housing demand abstract this paper presents a microsimulation model of housing demand aimed at analyzing effects of changes in tax schedules like many other countries sweden s income tax laws treat homeowners and renters asymmetrically therefore most changes in tax laws will affect housing demand and tenure choice we develop a microsimulation model which generates consistent estimates of the mean and variance of total housing demand and show that commonly used measures like analytic elasticities evaluated at mean values of the exogenous variables can yield very misleading predictions our model can be used to simulate almost any change in the tax system here we report results of three simple experiments one of which is a change in the rate at which imputed income from owner occupied housing is taxed

inefficiencies from metropolitan political and fiscal decentralization failures of tiebout competition we examine the welfare effects of provision of local public goods in an empirically relevant setting using a multi community model with mobile and heterogeneous households and with flexible housing supplies we characterize the first best allocation and show efficiency can be implemented with decentralization using head taxes we calibrate the model and compare welfare in property tax equilibria both decentralized and centralized to the efficient allocation inefficiencies with decentralization and property taxation are large dissipating most if not all the potential welfare gains that efficient decentralization could achieve in property tax equilibrium centralization is frequently more efficient an externality in community choice underlies the failure to achieve efficiency with decentralization and property taxes poorer households crowd richer communities and free ride by consuming relatively little housing thereby avoiding taxes copyright oxford university press

the future price of houses mortgage market conditions and the returns to homeownership the purpose of this paper is to provide a simple framework in which to analyze the impact of a perfectly anticipated increase in the future selling price of houses on current house purchase decisions in the presence of capital market imperfections since implicitly it is the after tax selling price of houses that is considered this analysis is equivalent to one of a decrease in the capital gains tax on houses at retirement in this paper assumptions about homeownership mortgage markets and liquidity constraints are added to a life cycle model of asset accumulation taking the date of house purchase as exogenous it is shown that the impact of an exogenous increase in the expected future price of houses depends on current mortgage market conditions the future price of houses relative to the current price and the ratio of liquid assets to future labor income as well as preferences also a simple model of a market for houses is presented to analyze the impact of an increase in the expected future price of houses on the current market clearing price the mortgage market and the redistribution of the housing stock to consumers according to their wealth and liquidity characteristics in the life cycle model as exposited by franco modigliani and robert brumberg an increase in consumption in one period requires a decrease in consumption in another period when owner occupied housing is added to the model the tradeoff between consumption in different periods becomes more complex purchasing a larger house entails an increase in the consumption of housing services and an increase in assets held in the form of a house but a decrease in either nonhousing consumption or the holdings of an alternative asset or both the response of the consumer to price or income changes is also limited by financial market constraints capital market imperfections have been introduced into the life cycle model by a number of authors see for example lester thurow thayer watkins thomas russell clark wiseman and christopher pissarides and several authors have explicitly considered the impact of capital market imperfections on the house purchase decision see william dolde and james tobin william poole donald lessard and modigliani and dolde most similar to this study although developed independently roland artle and p varaiya s paper includes the theoretical incorporation of the house purchase decision into a life cycle model they consider the problem of choosing the date of house purchase while treating the level of consumption of housing services as exogenous in the life cycle model in this paper the consumer chooses the size of house to purchase at an exogenous date to use the life cycle model in the framework of a market of houses it is assumed that the stock of houses and the prices of all other goods including the rate of return on the alternative asset are fixed all consumers are identical except perhaps for initial wealth as noted by irving fisher p 325 in a world of perfect foresight and perfect markets the rates of return on all assets are equated in equilibrium if markets are perfect with the stock of houses and other prices fixed the present price of houses will rise by an amount equal to the present value of an exogenous increase in a future price of houses when mortgage market imperfections are introduced this relationship no longer holds and a future price increase may result in a redistribution of the current stock assistant professor of economics university of michigan this paper is an extension of a chapter of my doctoral thesis at the university of wisconsin madison the helpful comments of donald d hester charles a wilson hal varian and george borts are gratefully acknowledged

a model of rental and owner occupied housing abstract a complete model of owner occupied and rental housing is developed the model allows for the endogenous determination of rents the user cost of owner occupied housing and housing tenure choice by individuals in the short run structure prices are endogenous while in the long run the size of the housing stock adjusts to equate structure prices to exogenous construction costs comparative static results emphasize the importance of marginal tax rates and distinguishing between the short and long run for a complete understanding of the impacts of inflation on housing markets

the repeat rent index abstract we employ a weighted repeat rent estimator to construct quarterly indexes that expand the profession s ability to make cross sectional comparisons of housing markets our analysis shows that there is considerable heterogeneity in the behavior of rents across cities over the 2000 2010 decade but the number of cities and years for which nominal rents fell is substantial rents fell in many cities following the onset of the housing crisis in 2007 and the repeat rent and bureau of labor statistics indexes differ due to sampling and construction methods

the impact of transaction costs and the expected length of stay on homeownership abstract economic theory suggests that an increase in the expected length of stay in a dwelling increases the probability of a household choosing to own a house rather than rent this hypothesis is derived from recognition that there are substantial transaction costs associated with homeownership and increased expected time in the home reduces the annualized transaction cost using a military data set we confirm that expected length of stay in a dwelling and the transaction costs of selling are very important to the ownership decision our best estimate of the transaction costs of selling a home are the sum of 3 of house value and 4 of household earnings

tax expenditures and other programs to stimulate housing do we need more abstract discussions to aid the housing industry raise several questions first does stimulation of housing demand require new direct subsidy programs and second are any programs to increase demand worth their costs to society the results in this paper indicate that the answer to both questions is no the existing subsidy to homeownership in the tax code is when combined with mortgage instruments that offset cash flow problems fully capable of generating large increases in demand at the cost of significant tax expenditures and the social benefits of increased housing demand are shown to be worth only about 60 of their costs consequently increasing housing demand can be readily achieved but doing so will be costly to the government and inefficient for society

booms and busts in the uk housing market the often volatile behaviour of uk house prices between 1957 and 1994 is analysed in an annual econometric model theory suggests that financial liberalisation of mortgage markets in the 1980s should have led to notable shifts in house price behaviour the evidence supports the predictions of theory suggesting shifts took place in wealth effects as in the consumption function and that real interest rates and income expectations became more important the presence of transactions costs suggests important nonlinearities in house price dynamics the paper also contains an explicit econometric treatment of expectations demography supply spillovers from the rented sector and of composition biases in the official house price index

tenure choice and the demand for housing this paper deals with the estimation by means of nonlinear methods of preference parameters from observation of behaviour in housing markets it differs from previous work on housing market behaviour in several important aspects first it treats the choice of tenure mode that is whether to rent or own and the housing consumption decision as a joint decision second it explicitly uses the same behavioural model in analysing these discrete and continuous elements of housing market behaviour third it allows for an analysis of the role of capital market imperfections and discriminatory practices in constraining housing market decisions

first mover disadvantages with private information we consider a leader follower game with output quantities as strategies so as to demonstrate the reduced advantages of the stackleberg leader in a stochastic environment with private information at the equilibrium the strategy of the leader reveals to the follower information about the demand in an attempt to signal low demand the leader contracts his output nevertheless unless the leader s information is infinitely noisy the follower can always correctly infer his signal we find a wide range of parameter values over which the follower is better off compared to the leader

exchange of cost information in oligopoly when do oligopolists gain by sharing their private information about their costs with one another what are the social welfare effects of such information exchange i study these questions by comparing the oligopolists expected profits under a cost sharing agreement with their expected profits in the bayesian equilibrium that would arise without cost sharing i also analyse the firms decisions to form a trade association to share their cost data under conditions of linear demand and cournot behaviour industrywide information exchange is the unique point in the core of the trade association membership game the exchange of cost data increases expected profits and welfare but reduces expected consumer surplus cost sharing increases efficiency by raising the market shares of lower cost firms and reducing the variability of aggregate output consumer surplus is diminished however because the variance of output is reduced and consumer surplus is a convex function of output

replicative evidence on the demand for owner occupied and rental housing some important results in urban economic theory and policy analysis rest upon housing demand and its associated price and income elasticities the extent to which the affluent choose to live away from the city s center thus increasing their commuting time depends on the relative income elasticities of housing demand and valuation of leisure in a more policy oriented framework the relative efficacies of income as opposed to housing price subsidies for low income households depend on the relative values of income and price elasticities

tax subsidies to owner occupied housing an asset market approach inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation this paper presents an asset market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock simulation results suggest that the accelerating inflation of the 1970s which substantially reduced homeowners user costs could have accounted for as much as a 30 percent increase in real house prices persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner occupied housing

life cycle theory inflation and the demand for housing there has been considerable interest lately in the influence of economywide inflation on the demand for housing under suitable equilibrium conditions such inflation creates three effects each of which may influence housing decisions first inflation raises initial mortgage payments through higher interest rates second it causes such payments to fall rapidly over time in real terms and third it creates a real growth in housing equity as borrowed debt is leveraged against the inflating value of homes two empirical studies one by kearl 6 and more recently by follain 3 have concluded that the sum of these impacts is adverse that is housing demand is reduced by greater economy wide inflation each suggests that credit constraints may explain this result in an attempt to understand better the microeconomic foundations of this empirical result schwab 9 and dougherty and van order 2 have developed fisher type models of intertemporal utility maximization which include a housing consumption choice schwab concludes that with a perfect capital market inflation should induce no distortion in consumer decisions about housing consumption dougherty and van order building on some unpublished work by poterba 8 argue that with interest deductibility from income taxes inflation reduces the after tax cost of housing capital and thereby increases housing demand these conclusions suggest that capital market imperfection must exist to explain the empirical results but just what kind schwab s paper addresses this question by introducing a borrowing constraint into a two period model 9 the constraint is absolute although schwab acknowledges that allowing collateralized borrowing is more realistic schwab s conclusions are two first he argues that if the constraint is nonbinding then the perfect capital market results prevail and second he demonstrates that if the constraints are binding the effect of inflation on

inflation risk taxes and the demand for owner occupied housing a bstract a portfolio choice model is formulated which focuses on the possibility of inflation hedging motives in housing demand in the 1970s an asset demand equation is used to estimate the capitalization of inflation expectations into house prices through tax mortgage and hedging effects the empirical results indicate that even after accounting for tax and mortgage effects the hedging motive was significant in bidding up house prices one implication is that the tax effects of inflation may have been overstated in previous research that ignored inflation risk

residential capitalization rates explaining intermetropolitan variation 1974 1979 abstract residential capitalization rates are shown to have varied substantially between metropolitan areas and to have declined over the late 1970s as asset values rose relative to market rents these variations are generally consistent with discounted cash flow models although market imperfections apparently prevent changes in the discounted net rental income from being fully and immediately capitalized into asset prices there also is evidence that speculative bubbles bid housing prices above the present value of the net rental stream for some markets at the peak of the housing boom

monetary and exchange rate arrangements for nafta abstract this paper considers the extent to which the north american free trade area nafta meets the criteria for a common currency area nafta is compared with the ec a regional grouping for which initial plans for a monetary union are already in place most of the anticipated benefits from a monetary union in the ec apply with equal force to nafta however because the underlying disturbances are more diverse across members of nafta the costs of abandoning the exchange rate instrument are likely to be higher this is particularly true when nafta is compared to the ec s continental core

mergers and investments in cost reduction with private information abstract we present a model of cost reducing r d investments where the marginal cost realization is private information of the innovating firm the main contribution is the conclusion according to which with merger anticipations the innovating firm does not have ex ante incentives to reveal its cost realization prior to the takeover interestingly we also find the expected consumer surplus to be higher for the regime characterized by incomplete information as compared to a regime based on information sharing

econometric regime shifts and the us subprime bubble using aggregate quarterly data for the period 1975 q1 2010 q4 i find that the us housing market changed from a stable regime with prices determined by fundamentals to a highly unstable regime at the beginning of the previous decade my results indicate that these imbalances could have been detected with the aid of real time econometric modeling with reference to stiglitz s general conception of a bubble i use the econometric results to construct two bubble indicators which clearly demonstrate the transition to an unstable regime in the early 2000s the indicators are shown to granger cause a set of coincident indicators and financial in stability measures finally it is shown that the increased subprime exposure during the 2000s can explain the econometric breakdown i e the housing bubble may be attributed to the increased borrowing to a more risky segment of the market copyright 2013 john wiley sons ltd

the demand for housing household headship rates and household formation an international analysis this study investigates the influence of availability and affordability of housing on demographic changes through an international analysis of the relationship between age specific headship rates and housing availability and affordability the researchers describe the basic trends in household formation and headship rates in canada france great britain and the united states investigate the economic determinants of age specific household headship rates in the four countries and discuss the implications for future housing analysis the findings indicate that the considerable increase in household headship rate during the recent postwar period has been facilitated in these four countries by the increasing real affordability of housing in addition there was a clear relationship between the household age category and the responsiveness to economic variables excerpt

property taxation and the demand for housing an econometric analysis abstract there is disagreement among economists regarding the effect of a local increase in property taxation on the housing market in defining the price of housing services studies of the demand for housing have treated the property tax exclusively as an excise tax on housing consumption two recent theoretical developments suggest this is a misrepresentation of the tax one theory holds that the excise effects of property taxation may be shifted backward to the factors employed in the production of housing the other theory concludes that the property tax is not an excise but rather serves as an efficient price for local public services to investigate these hypotheses data from the annual housing survey were employed to estimate a housing demand model which included the net effective property tax rate among the set of independent variables in addition to revealing the property tax housing demand relationship the model provides more reliable estimates of income and price elasticities by eliminating specification errors found in previous studies results indicate that the property tax reduces the housing consumption of central city homeowners but does not distort the suburban housing market

tenure choice and condominium conversion abstract in this paper we examine the tenure choice decisions of households involved in the condominium conversion process we apply a model of tenure choice selection to two separate samples preconversion residents and postconversion residents we find that the primary factors influencing homeownership in general income and relative prices are also strong influences in determining condominium ownership however the tenure choice decisions of preconversion residents who are confronted with a forced choice are more heavily influenced by income and expected mobility post conversion tenure choice varies more with demographic factors and is more price elastic in nature

the changing route to owner occupation the impact of borrowing constraints on young adult homeownership transitions in britain in the 1990s the reduction in young adult homeownership rates in britain in the 1990s was partly caused by demographics and partly by a shift in the income distribution most of their relative income deteriorat

tenure neutral and equitable housing taxation equity and neutrality are distinct concepts in housing taxation and weak and strong tenure neutrality should be distinguished when a tax system is tested for those criteria the taxes paid by landlords must be included as they affect the rents renters pay this paper defines appropriate tests applies them to a stylised tax system and proposes tax changes designed to restore tenure equity and or neutrality it shows how the homeowner s implicit income should be computed for taxes to be fundamentally tenure neutral or equitable or both it also shows the key role played by the cost differential in producing housing services under owner occupation and renting

an econometric model of housing price permanent income tenure choice and housing demand abstract this paper addresses the determination of housing price permanent income tenure choice and housing demand full housing demand elasticities incorporate the interactive effects among the four stages of the model price and income have major effects in the tenure choice equation sociodemographic variables such as age have complex effects that may be lost in simpler forms of estimation

tenure choice and housing demand in japan abstract this paper reports the results of an empirical analysis of tenure choice and housing demand that makes use of household level data from japan the paper finds that the price and permanent income elasticities of demand for owneroccupied housing are approximately 0 8 and 1 4 respectively and that these estimates are highly robust the price elasticity estimate is comparable to those for other countries but the income elasticity estimate is much higher possibly because of the greater accuracy of the income variable it is also found that the tenure choice and housing demand decisions are apparently not made simultaneously

the dynamics of the singapore private housing market in this paper a dynamic stock flow model is modified and applied to the singapore private housing market two empirical models are then constructed which offer an explanation for the dynamic patterns of both real private housing prices and new housing construction in the long run movements in the real gdp per capita and the total housing stock are found to have significant impacts on real housing prices while the user cost the public resale housing prices and the autocorrelation of housing prices with one lag explain most of the short run dynamics of real housing prices on the supply side the long run price elasticity of new housing construction is 1 31 it is also found that long run new housing construction drops 6 5 per cent for every 1 per cent increase in the total housing stock

housing investment in the united states a supply determined model of housing investment is estimated from quarterly data over the 1963 83 period the model is built on dynamic marginal cost pricing considerations and allows short and long run supply elasticities to differ these are estimated as 1 0 and 3 0 respectively but most of the long run response occurs within 1 year rapid adjustment speed and the sizable long run elasticity of supply are important factors in understanding the volatility of housing investment the data also suggest some anomalies in the expected present value theory of asset pricing for housing capital

the allocation of capital between residential and nonresidential uses taxes inflation and capital market constraints we have constructed a simple two sector model of the demand for housing and corporate capital economic growth and an increase in the inflation rate were then simulated with a number of model variants the model and simulation experiments illustrate both the tax bias in favor of housing and the manner in which the increase in inflation between 1965 and 1978 magnified it the existence of capital market constraints offsets the bias against corporate capital but it introduces a sharp inefficient reallocation of housing from less wealthy constrained households to wealthy households who do not have gains on mortgages and are not financially constrained

house prices and consumer welfare we develop a new approach to measuring changes in consumer welfare due to changes in the price of owner occupied housing in our approach an agent s welfare adjustment is defined as the transfer required to keep expected discounted utility constant given a change in current house prices we demonstrate that up to a first order approximation there is no aggregate change in welfare due to price increases in the existing housing stock this follows from a simple market clearing condition where capital gains experienced by sellers are exactly offset by welfare losses to buyers we show that this result holds approximately even in a model that accounts for changes in consumption and investment plans prompted by current house price changes there can however be changes in welfare due to additions to the stock of housing or to changes in the price of renovating and upgrading the existing stock of housing for the united states we estimate the welfare cost of house price appreciation to be an average of 127 per household per year over the 1984 1998 period

housing appreciation mortgage interest rates and homeowner mobility abstract this paper presents a model of the optimal timing of tradeup which considers consumption and investment motives of homeownership households determine the optimal timing of trading up so as to maximize their intertemporal utility of both housing and nonhousing consumption first we consider current homeowners who already own a house and expect that they trade up to a more valuable house at some point in the future housing appreciation tends to induce an earlier optimal timing of trading up moreover housing appreciation makes current homeowners better off in terms of welfare however current homeowners suffer from a rise in mortgage interest rates second we consider first time home buyers who have decided to buy a house and expect to trade up to a more valuable house in the future their initial housing consumption is determined by an initial downpayment constraint in this case the effect of housing appreciation on the optimal timing of trading up is ambiguous and unlike current homeowners first time home buyers suffer from housing appreciation moreover as current homeowners first time home buyers suffer from a rise in mortgage interest rates most of the theoretical analytic results are ambiguous accordingly we perform numerical simulations based on the theoretical model in order to determine the most likely comparative effects for a stylized set of parameters as is apparent the model captures the recent observations on homewner mobility and suggests that macroeconomic variables such as housing appreciation and mortgage interest rates effect the optimal timing of trading up and homeowner s welfare nevertheless the model in this paper has several shortcomings which should be the subject of future research first transaction costs are ignored if transaction costs are incorporated the lock in effect from a rise in mortgage interest rates is well explained however the general analysis above is not altered in any essential way second multiple moves are not considered in this model therefore we concentrate on the timing of one tradeup as opposed to the timing and frequency of trading up in a different vein it would be interesting to test empirically the importance of the effects of macroeconomic variables on trading up by using microdata

parental wealth and first time homeownership a cohort study of family background and young adults housing situation in sweden this paper investigates whether family background seems to have any influence on first time homeownership recent studies have indicated that it has become more difficult to become established in the housing market and such situations may increase the importance of parental wealth in this study parental wealth is estimated as family background information on parents homeownership father s socioeconomic status and single parenting unique cohort data for three birth cohorts suggest that there is a significant cohort effect in young adults tenure decision furthermore the results imply that parents homeownership has become a more important predictor of the transition to first time homeownership for those young adults facing increasing problems in the housing market

dynamic modeling of housing tenure choice abstract in this study a dynamic random effects simultaneous equation model is developed to model household tenure choice decision the novelty of the study lies in accounting for the dynamic aspects of housing tenure mode namely a move is prerequisite to a change in tenure mode and they are determined jointly expected mobility and tenure choice are interdependent decisions and tenure choice may be state dependent i e taste for ownership acquired or reinforced through the experience of being an owner in addition unobservable household heterogeneity is controlled by imposing a random effects specification the estimation is based on panel data from the psid using the method of maximum simulated likelihood

house price dynamics and market fundamentals the parisian housing market the paper compares two methods to evaluate the effect of market fundamentals on housing price dynamics the first method follows the traditional two step procedures found in the literature in which

predation mergers and incomplete information this article examines the strategic pricing of duopolists in anticipation of a takeover of one by the other in equilibrium the acquiring firm may expand its output to signal that it is a low cost rival and thereby improve the takeover terms if the merged firm willface potential entry a premerger expansion of output may be necessary to deter entry and to make the merger profitable in that case the acquiringjirm s output expansion increases industry concentration by facilitating the takeover and by deterring entry this establishes the rationality of predatory output expansions even when a merger or a takeover is possible and indeed anticipated a voluminous literature is devoted to exploring the role of pricing in altering industry structure to achieve monopoly power that literature discusses both price cutting to drive existing rivals from the industry predatory pricing and setting low prices to deter potential entrants limit pricing the former has received the lion s share of the attention of antitrust commentators and enforcers but the rationality of predatory pricing has been seriously questioned the major criticism has two parts i takeovers are a superior means of achieving monopoly power and where legal should therefore be used instead of price cutting and ii if a takeover is anticipated premerger price cutting merely dissipates some of the value of the merging parties and would thus be irrational the first argument was originally advanced by mcgee 1958 and later by telser 1965 and bork 1978 the essential idea is that since predation is costly firms should realize that a more profitable arrangement in the form of a merger exists and ought to be negotiated the second argument is a natural extension of the first in response to this criticism yamey 1972 provides two arguments first the aggressor knows that he may face other rivals in the future entrants into this or other markets those potential rivals may draw inferences from his current behavior about the response they will face if they enter in that case the aggressor may wish to develop a reputation for aggressive behavior second even if a takeover is anticipated the terms of the takeover may be affected by the pretakeover pricing

crowd out effects of place based subsidized rental housing new evidence from the lihtc program abstract since its inception in 1987 the low income housing tax credit lihtc program has ballooned into the largest ever source of subsidized construction of low income housing in the united states accounting for one third of all recent multi family rental construction this paper examines the crowd out effects of this increasingly important source of low moderate income housing to do so we analyze the impact of lihtc construction at three different levels of geography msa county and 10 mile radius circles this allows us to employ increasingly extensive geographic fixed effects that help to difference away unobserved factors political variables are also used as instruments to further facilitate identification in all of our models iv estimates yield substantially greater crowd out than ols confirming the endogenous attraction of lihtc development to areas ripe for new construction our most robust iv estimates indicate that nearly 100 of lihtc development is offset by a reduction in the number of newly built unsubsidized rental units although the confidence band around this point estimate allows for less dramatic assessments additional estimates suggest that lihtc development has a much more moderate impact on construction of owner occupied housing but these estimates are imprecise overall while lihtc development may well affect the location of low moderate income rental housing opportunities our estimates suggest that the impact of the program on the number of newly developed rental housing units appears to be small

user cost and housing tenure in developing countries abstract this paper reports on research conducted at the world bank to increase understanding of developing country housing markets in particular of housing demand behavior the objectives of the paper are 1 to briefly review recent evidence on housing demand parameters in developing countries including new estimates for colombia egypt el salvador ghana india jamaica korea and the philippines and 2 to examine similarities and differences among cities in housing demand the analysis emphasizes differences in housing demand by tenure particularly for renters and owners but also for squatters and non squatters and paralleling the literature in developed countries stresses the importance of accounting for the impact of income and relative prices on housing demand

choice of mortgage instrument liquidity constraints and the demand for housing debt in the uk the research uses microdata to estimate reduced form mortgage demand equations based on truncated regressions dissagregated by choice of mortgage instrument the choice is between a standard annuity mortgage and a balloon type mortgage the endowment the estimates are used to indicate the differential impact of credit market rationing and financial liberalization on households the results indicate significant variations in mortgage demand by choice of mortgage instrument econometric testing demonstrates that the choice between an endowment and a repayment mortgage can be used as an exogenous indicator of liquidity and portfolio positions and different user costs of owner occupation

moving and improving strategies for attaining housing equilibrium the concept of equilibrium consumption is central to much housing market analysis yet analysts must contend with the likelihood that many housing consumers are not at an exact equilibrium level of

estimating housing consumption adjustments from panel data abstract although time series analysis of panel data has generally not been used in the study of housing demand longitudinal analysis provides the opportunity to increase our understanding of housing adjustments over time in particular time series analysis of housing choice using panel data permits appropriate use of both time series and cross sectional variation in housing prices provides the opportunity to separate age and cohort effects and facilitates integration of mobility analysis with housing choice analysis in this paper a longitudinal discrete choice model of the choice of housing tenure and size is presented and estimated using panel data this conditional fixed effects multinomial logit model developed by g chamberlain is computationally convenient and successfully accounts for time invariant differences among households while household specific unobserved characteristics can be readily accounted for in a linear model this is not the case for a quantitative choice model the use of a model of the type employed here thus provides a crucial link between time series analysis and a discrete choice setting estimation of this model yields results with respect to age and price that differ from results obtained from individual and pooled cross sections this provides support for the plausible proposition that housing choices are intertemporally correlated and more importantly emphasizes the importance of accounting for this correlation to estimate consistently the parameters of housing choice models

a residence time model of housing markets abstract this paper estimates a semi markov model of housing markets in which families move from one home to another spend a random amount of time in each home and choose whether to own or to rent at each move limiting conditions of the semi markov process are used to characterize the steady state frequency of owner occupied housing and to simulate the impact of changes in housing tax policy this approach differs markedly from previous studies of housing tax policy which focus on the entire population as opposed to the movers and ignore the effect of household residence times see king 1980 rosen 1979 white and white 1977 or laidler 1969 residence times further influence the analysis by affecting the relative cost of owning to renting in the tenure choice model homeowners pay legal and realtor fees at the time they move out of their homes which renters do not have to pay the discounted value of these fees declines with length of stay and provides a structural explanation of why families with longer residence times have a greater propensity to own results from the empirical analysis suggest that the semi markov model closely predicts conditions in the united states and provide important insights into the effects of housing tax policy residence times are also found to influence household tenure choice through their impact on the discounted legal and realtor fees paid by homeowners

housing vacancy and rental adjustment evidence from hong kong the traditional rental adjustment equation is flawed in that the equilibrium paths for the adjustment of rents and vacancy rates cannot hold simultaneously over time this paper suggests a two equation model of rental adjustments based on adaptive expectations rather than the single equation model presented in the traditional literature and provides empirical tests annual data from the housing market in hong kong during the 1980 96 period are consistent with the adjustment equation the results also show that the rate of change of real rents is neutral with respect to inflation

housing and endogenous long term growth abstract in this paper we develop an endogenous growth model where housing plays a role as a consumption and an investment good for households as an input to production and as a production sector we show that the long term endogenous growth rate for the economy while not affected by housing related preference parameters depends critically on housing related production parameters the key modeling assumption is that housing and other assets in the economy are not perfect substitutes with this we can show that the endogenous long term growth rate depends on the relative price of housing and other types of capital accordingly the effects of productivity shocks on growth can be understood through their effects on the relative asset price and the corresponding changes in capital intensity we show that productivity shocks to the three sectors of production manufacturing construction and educational and training activities have positive effects on long term growth for reasonable parameter values however the responsiveness of the long term growth rate to shocks in construction is greater than responsiveness to shocks in manufacturing

mergers and investments in cost reduction with private information revisited abstract this paper re examines the model developed by stenbacka 1991 which addresses the investment incentives of an innovating firm operating in anticipation of a merger with its rival in a cournot duopoly setting in contrast to stenbacka we find that the innovating firm need not always invest more should it conceal rather than reveal its r d outcome prior to the takeover furthermore we show that the ex ante incentive for the innovating firm to conceal its private information is perfectly consistent with earlier findings in the information sharing literature

quantifying the decision to become a first time home buyer becoming a first time homebuyer is quantified in two stages using household data a renter demand curve is estimated to calculate the consumer surplus gain from moving into housing consumption equilibrium probit is used to estimate the probability of becoming a first time homebuyer the model suggests that overcoming the transactions cost of buying and the gain from housing consumption equilibrium are important to the decision renting is explained by current housing demand through income and family size buying for the first time is explained by factors which reduce transactions costs such as assets marital status and education disequilibrium in rental housing consumption is also important the results further suggest that permanent income is not important to the decision

inflation and housing demand a new perspective abstract the effects of inflation on the housing market are investigated in this study of new house prices in 42 u s metropolitan areas from 1971 to 1978 the results show that estimates of the elasticity of real house prices with respect to the real user cost have been biased sharply downward owing to an errors in variables problem when the error term in estimating expected inflation is recognized explicitly the negative relationship between real house prices and real user cost is found to be very strong this analysis helps to resolve the conflict in the literature between the negative cash flow effects and the positive untaxed capital gains and declining real payment effects resulting from inflation

cross sectional estimation of a simultaneous model of tenure choice and housing services demand abstract in this paper we analyze the demand for housing services integrating into a single analysis a systematic treatment of several important conceptual and empirical issues our three major objectives are to 1 evaluate the empirical importance of the simultaneity between the tenure choice and consumption level decisions 2 analyze the relationship between household type and housing demand and 3 present new estimates of the parameters of housing demand which are based on detailed microdata in the process we derive and estimate overall income and price demand elasticities which incorporate the impacts of income and price on both the tenure choice and consumption level decisions

a survey of measurement biases in price indexes abstract this paper reviews the literature on measurement error in the major us price indexes the consumer price index cpi the producer price index rpi and the gross domestic product gdp deflators we take as our point of departure triplett s 1975 survey and focus on the studies of measurement error that have appeared since then we review the problems of substitution bias quality bias new goods bias and outlet substitution bias that are generally considered to be the main sources of error in price indexes the bulk of the paper is devoted to problems in the cpi and ppi as the gdp deflators tend to be based mainly on the components of these series we find that there has been surprisingly little work on the problem of overall measurement error in any of these price indexes and we conclude that there is very little scientific basis for the commonly accepted notion that measured inflation at 2 to 3 percent a year is consistent with price stability

does inflation affect real behavior the case of housing an important tradition in economics is to assume that demand depends upon relative prices and is homogenous of degree zero for the most part this has been interpreted as meaning inflation changes in the price level leaves demand unchanged recent work by a number of economists has challenged this position for the case of housing demand two arguments have been made that inflation acting in concert with existing institutions alters the quantity of housing demanded and the decision to rent or own a house the first argument states that inflation and the standard fixed payment mortgage combine to reduce the size of the mortgage loan a household can obtain for the purpose of buying a home this works to reduce the quantity of owner occupied housing demanded given the importance of mortgage finance to the demand for owner occupied housing the second argument focuses on the inflation adjusted after tax cost of owner occupied housing it simply states that an increase in the rate of anticipated inflation of the general price level reduces the after tax cost of housing thus increasing the demand for housing and the demand for homeownership there has been little empirical testing of these two arguments the purpose of this paper is to formulate and estimate a model which will give an indication of the quantitative significance of the two arguments a housing demand equation and a tenure choice equation own versus rent are estimated using a sample of about 6000 households from the 1975 annual housing survey 10 the estimates suggest that inflation dampens housing demand and homeownership opportunity for most households even though the inflation adjusted after tax cost of owner occupied housing declines as inflation heats up the paper consists of six sections including the introduction section two examines the ways inflation affects housing choices in more detail the third section contains the specification of the econometric model that forms the basis of the study section four is a discussion of econometric problems and the data used the results of the estimates are discussed in the fifth section the paper concludes with a presentation of the major conclusions and policy implications of the study

technological competition uncertainty and oligopoly abstract in an oligopoly context the present technological choice of a firm which expects to receive private revelant information just prior to the uncertain market stage has both a flexibility value and a strategic commitment value in contrast to some common wisdom ideas we provide a natural two stage competition framework in which an increase in uncertainty always raises the commitment value of the technological choice of the firm and may decrease its flexibility value when the increased uncertainty takes the form of more variable beliefs the first result tends to reinforce therefore the findings of the strategic commitment literature under certainty

alternative mortgage instruments the tilt problem and consumer welfare mortgage instrument in the united states for the last 50 years and for much of this period it has performed well however during periods of high and volatile rates of inflation the sfpm suffers from severe weaknesses 1 foremost among these problems from the standpoint of the borrower is the tilt in the stream of real mortgage payments toward the initial years of the mortgage for consumers unconstrained by capital market imperfections this tilt is unimportant however a consumer is typically unable to borrow against expected higher future income or against the nominal capital gains that accrue to the owner of a house over the life of the mortgage in addition common practices of mortgage lenders often limit mortgage payments to some fraction of income at the time of purchase together these liquidity constraints create a mismatch between the time se quence of mortgage payments and income a mismatch that reduces the number of borrowers who qualify for financing and that limits the value of the house purchased by those who do obtain financing 2 in an attempt to reduce the problems created by this mismatch a variety of alternative mortgage instruments amis has been suggested three of the most important are the graduated payment mortgage gpm the shared appreciation mortgage sam and the price level adjusted mortgage plam 3 with the gpm mortgage payments rise at some specified rate during a portion of the mortgage life the sam enables the lender to share in the appreciation of the university of colorado boulder and syracuse university respectively this paper was writ ten while the first author was at syracuse university funding for the research was shared by the office of the comptroller of the currency the federal horne loan bank board and the department of housing and urban development mary anne beeman served as research assistant and the manu

inflation taxes and housing a theoretical analysis abstract this paper examines the real effects of inflation under a distortionary tax system the presence of a tax subsidy to housing substantially alters the effects of inflation on the capital intensity of production and on the market interest rate the analysis suggests that not taxing the flow of services from housing has caused inflation to reduce capital intensity thereby decreasing u s productivity furthermore this tax subsidy has caused inflation to raise the real interest rate while reducing the after tax real returns to assets

house prices non fundamental components and interstate spillovers the australian experience abstract using australian capital city data from 1984q3 2008q2 this paper utilizes a dynamic present value model within a var framework to construct time series of house prices depicting what aggregate house prices should be given expectations of future real disposable income the fundamental price and continues by comparing capital city fundamental prices with actual prices the extent to which revealed capital city non fundamental components spillover from state to state as well as their long term impact is also investigated results provide evidence of periods of sustained deviations of house prices from values warranted by income for all state capitals with the greatest deviations arising in the nsw market and starting around 2000 in general nsw is relatively more susceptible to spillovers transmitted from other states while act and wa are most isolated from the rest of the country

mobility costs frictional unemployment and efficiency with imperfect job information flows it is plausible that the distribution of job offerings becomes more attractive when there are more vacancies and more unemployed with word of mouth communication this condition is derived given this condition steady state equilibrium is not efficient with welfare increased by the introduction of unemployment compensation even though all agents are risk neutral in this way workers become more selective in the jobs they accept

housing price inflation family growth and the move from rented to owner occupied housing this paper uses data from annual housing surveys to investigate the relationship between growth in family size and the move from rented to owner occupied housing in the mid and late 1970s a series of studies conducted in the 1950s and 1960s established that growth in the size of the family triggered moves from rented to owner occupied housing changes in house price inflation during the 1970s may have altered the social and economic conditions associated with a move from rented to owner occupied housing log linear analyses of data from the 1974 and 1978 annual housing surveys indicate that while growth in the size of a renter s family continued to predict the purchase of owner occupied housing in 1978 the composition of the purchasing group changed significantly between 1974 and 1978 with childless couples increasing and households with children decreasing the declines in the latter group occurred primarily among poorer households the implications of these changes for the life cycle housing cycle

unravelling the residential rent value puzzle an empirical investigation this paper tests empirically whether observed variation in the relationship between residential rents and housing prices in us metropolitan areas during the 1974 79 period can be attributed to differences in the user cost of residential capital consistent with user cost models house values are found to be high relative to market rents where real after tax financing costs are low and where expected capital gains from appreciation are large at the same time high rental vacancies lagging rents and high inflation rates per se also are found to raise structure prices relative to market clearing rents suggesting significant adjustment lags from the durability of the housing stock transaction costs and segmentation between owner and rental submarkets

estimating real income in the united states from 1888 to 1994 correcting cpi bias using engel curves this paper provides the first estimates of overall cpi bias prior to the 1970s and new estimates of bias since the 1970s it finds that annual cpi bias was 0 1 percent between 1888 and 1919 and rose to 0 7 percent between 1919 and 1935 annual cpi bias was 0 4 percent in the 1960s and then rose to 2 7 percent between 1972 and 1982 before falling to 0 6 percent between 1982 and 1994 the findings imply that we have underestimated growth rates in true income in the 1920s and 1930s and in the 1970s

the effects of inflation and income taxes on interest rates some new evidence this paper reexamines the empirical relation between inflation and interest rates concentrating on the tax effect proposed by darby and feldstein using the random walk intercept model relative responses of taxable yields and tax exempt yields to expected infla tion are estimated the results show that for the sample period 1953 1982 the nominal yields on treasury bills rise at a rate greater than one for one with expected inflation while the nominal yields on default free municipal bonds rise approximately one for one with expected inflation thus the tax adjusted fisher hypothesis by darby and feldstein is empirically supported the components of treasury bills are also extracted and their variances are compared it is shown that variation of expected inflation is not overwhelmingly larger than that of the after tax real rate therefore on an after tax basis changes in the real rate explain a substantial portion of changes in the nominal rate of interest

the price adjustment process for rental housing and the natural vacancy rate institute of a university of ii business and california economic research berkeley center for real estate and urban economics working paper series working paper 82 53 the price adjustment process for rental housing and the natural vacancy rate by kenneth t rosen lawrence b smith these ers are preliminary in natu heir purpose 39 to stimulate discussion comm therefore t are n ted or q d in any pub on wit the express permissi the author graduate school of business administration