Wages and prices: Are workers fully compensated for cost of living differences?

This paper investigates the equilibrium relationship between wages and prices across labor markets. Of central interest is the extent to which workers receive higher wages to compensate for differences in the cost of living. According to the spatial equilibrium hypothesis, the utility of homogenous workers should be equal across labor markets. This implies that controlling for amenity differences across areas, the elasticity between wages and the general price level across areas should equal one, at least under certain conditions. I test this hypothesis and find that the predicted relationship holds when housing prices are measured by rents and the general price level is instrumented to account for measurement error. When housing prices are measured by housing values, however, the wage-price elasticity is significantly less than one, even using instrumental variables. Rents reflect the price paid for housing per unit of time and are arguably the superior measure. Thus, findings in this essay provide support for the full compensation hypothesis. These findings also have important implications for researchers estimating the implicit prices of amenities or ranking the quality of life across areas.     

A graph theoretic approach to markets for indivisible goods

Many important markets, such as the labor market and the housing market, involve goods that are both indivisible and of budgetary significance. We introduce new graph theoretic objects ideally suited to analyzing such markets. We show that the minimum equilibrium price is characterized by a certain optimization problem on these graph theoretic objects.     

A probabilistic approach to the structure of rental housing markets

A probabilistic view of the structure of urban housing markets is developed. The demand side is based on aggregate probabilistic demand functions derived from microbehavioral random utility theory. The supply side examines the short-run pricing of the housing stock by developing “asking rent theory,” which explains how a housing supplier must find the optimal rent that maximizes expected revenue. Next, concepts of aggregate market clearing and market equilibrium are defined. Finally, a two-submarket model with specific assumptions regarding the representation of demand and the nature of market signaling is examined in detail and is given a graphical illustration. In closing, directions for extending the probabilistic approach both within and beyond urban analysis are pointed out. All analysis in this paper is for a stationary urban economy, with the housing stock assumed fixed.     

Existence and description of housing market equilibrium

A rental housing market with finite numbers of non-identical consumers and indivisible housing units, each composed of a vector of attributes, is studied. A partial equilibrium, open city analysis is presented in which all other commodities are perfectly divisible and elastically supplied on national markets. Sufficient conditions for the existence of an equilibrium are rigorously established using a fixed point argument that is based on a bidding arrangement between agents. It is then shown that, although the set of equilibria is not a singleton, all equilibria are similar enough to ensure a strong resemblance between open and closed cities.     

Selective housing policy in local housing markets and the supply of housing

Selective programs and subsidies have an impact on both the financial position and the housing conditions of the household to whom they are allocated. They also affect the equilibrium outcome in housing markets. This study analyzes how the housing stock in Norwegian municipalities is affected by selective targeted interventions on the supply and demand-sides of the market. The empirical analysis shows that additions to the stock of public housing increases the total housing stock. For every 100 new public units built, 60 units are added to the total housing stock. Demand-side subsidies are also shown to increase the size of the housing stock. Using a linear spline it is shown that the magnitude of the marginal effect on the total size of the housing stock is strongly decreasing in program size.     

Contract equilibria in a regulated rental housing market

Various contractual equilibrium concepts for a regulated rental housing market are studied in this paper. Regulation refers to rental contracts with institutionally prescribed structures and rental prices, a situation common for housing markets with restrictive rental protection legislation. Contracts can then be considered as indivisible commodities with certain unusual characteristics. Existence of equilibria of the various types is shown under rather weak assumptions.     

我国四大城市住宅价格与租金的关系研究

近20年,我国城市住宅价格经历了大幅下跌与上涨,而同期租金逐年下降,房价与租金之间的关系令人关注。本文利用1993年第二季度至2010年第一季度的数据进行实证分析,结果表明北京、上海、广州和深圳的租金指数和房价指数之间不存在协整关系,说明住宅市场价格与租金不存在长期均衡关系,房价严重脱离了租金这一基本面的影响,不再遵循现值理论模型所揭示的两者之间的运行趋势,表明房价泡沫在长期积聚。为了预防市场泡沫破灭对经济体造成的严重冲击,政府应该严格监察与调控房地产市场。     

城市发展与住房意愿支付价格

以城市在岗职工的平均劳动收入水平和反映城市生活质量的各类宜居性指标建立了中国35个主要城市的城市发展与住房需求关系的模型,并以此估计了城市住房意愿支付价格。实证结果表明,城市在岗职工的平均劳动收入水平和以各类宜居性指标反映的城市生活质量可以解释70%左右住房价格的城市间差异。虽然城市劳动收入对住房意愿支付价格的影响仍然很大,但随着社会经济的发展,中国主要城市的生活质量对住房意愿支付价格增长的贡献有逐步增大的趋势。     

Wealth effect and investor sentiment

This paper investigated the relationship between the U.S. stock and housing markets as well as their influence on the wealth effect of consumption and found that the stock market sentiment index can explain changes in the wealth effect. The empirical results indicate that these two markets exert a wealth effect on consumption. The estimation results of the Markov-switching model indicate two states: a state in which the stock market influences its coexistence with the housing market and a state in which the housing and stock markets are unrelated. Public optimism regarding stock market investments affects the probability of transitioning between these states.     

Divergence in alternative Hicksian welfare measures: the case of revealed preference for public amenities

This paper investigates the divergence between the two Hicksian welfare measures of non‐traded amenity improvement associated with housing. First, the Hicksian surplus measures for amenity changes are analytically developed based on explicit specification of utility structures. A hedonic two‐stage approach is then applied to empirically show that, for quantity changes, in contrast to hypothetical markets, divergence in real market is small. The paper also analytically develops expressions for the income and substitution effects and empirically shows that for a given income effect, the greater the substitution effect the smaller the divergence between the two measures. Copyright © 2002 John Wiley & Sons, Ltd.     

Is there an equilibrating relationship between house prices and replacement cost? Empirical evidence from Berlin

It is a feature of competitive markets with forward-looking participants that a good’s benefit and its production cost are equalized in equilibrium and that no resources are wasted during the adjustment process. For housing markets, there is mixed evidence whether they meet this standard of allocative efficiency. Based on a unique data set with rich information on prices and cost, we examine the market for single-family houses in Germany’s capital Berlin. At the aggregate market level, we find that prices and cost tend to equalize in the long run. Short-run adjustment appears to be sufficiently fast and properly anticipated to prevent systematic excess profit opportunities. At the cross sectional level of individual houses, we find support that resources are allocated efficiently between different market segments. Taken together, our results provide sufficient evidence that the market in Berlin is efficient.     

Homevoters vs. leasevoters: A spatial analysis of airport effects

We use a public referendum on a new aviation concept in Berlin, Germany, as a natural experiment to analyze how the interaction of tenure and capitalization effects influences the outcome of direct democracy processes. We distinguish between homevoters, i.e., voters who are homeowners, and leasevoters, i.e., voters who lease their homes. We expect that homevoters would be more likely to support initiatives that positively affect the amenity value of a neighborhood because some of the related benefits of leasevoters are neutralized by adjustments in market rents. Likewise, homevoters would be more likely to oppose initiatives that negatively affect the amenity value of a neighborhood. Our empirical results are consistent with these expectations, implying that public votes on local public goods do not necessarily reflect the spatial distribution of welfare effects in mixed-tenure environments.     

Contract equilibria in housing markets

The paper provides a contractual equilibrium model of differentiated housing markets. Within a competitive framework the existence of a contract equilibrium, respecting certain enforceability conditions, is shown. The allocation, induced by these contract equilibria in the housing markets, is possibly characterized by demand rationing, even under the assumption of free contract markets.     

The down-payment constraint and UK housing market: Does the theory fit the facts?

This paper considers empirical implications of the down-payment constraint for the UK housing market. It shows that, at the aggregate-level, models of the housing market with this constraint are consistent with a number of stylized facts. The paper then exploits variation across local housing markets and considers how leverage affects the response of house price inflation to shocks. The evidence, based on data for 147 district-level housing markets for the period 1993–2002, suggests that a large incidence of households with high leverage (loan-to-value ratios) raises the sensitivity of house prices to a shock. This is also consistent with the down-payment constraint model.     

Monetary policy implications of housing shift-contagion across regional markets

This paper extends the shift-contagion concept to housing price returns in order to examine co-movements between pairs of regional housing markets in the US. It associates nonlinearities of housing prices with the monetary policy criteria at disaggregate levels. The framework with Markov-switching volatility in Gravelle et al. (Journal of International Economics 68:409–423, 2006) is utilized to investigate housing contagion phenomena which are defined as the switches in the structural transmission of common shocks across regional housing markets. The empirical results suggest that interactions between regional and nationwide housing markets switch across low-volatility and high-volatility regimes of common shocks for the Northeast and the West whose housing price returns are nonlinear. In addition, there is the significantly time-varying interdependence between the West and each of the other three regional housing markets. The estimated indicator of the monetary policy effectiveness implies that monetary policies can be effective in the Northeast and the West because they are more closely linked with other regional housing markets in volatile phases which are subject to housing crises. Noticeably, the broken interrelationships between regional housing markets and real economies in the 2001 recession imply high vulnerability to housing bubbles for regional markets, while short-term monetary policies can be effective in stabilizing the housing market turmoil around 2007.     

Informal Housing in the United States

Research on informal housing tends to focus overwhelmingly on less developed countries, downplaying or ignoring entirely the presence of informality in United States housing markets. In actuality, a longstanding and widespread tradition of informal housing exists in the United States but is typically disregarded by scholars. In this article we draw on three definitions of informality—as non‐compliant, non‐enforced, or deregulated economic activity—to characterize examples of informality in US housing markets, focusing in particular on five institutions that govern housing market activity in this country: property rights law, property transfer law, land‐use and zoning, subdivision regulations, and building codes. The cases presented here challenge the notion that informality is absent from US housing markets and highlight the unique nature of informal housing, US style—namely, that informal housing in the US is geographically uneven, largely hidden and typically interwoven within formal markets. We conclude with a discussion of how research on informal housing in the US can inform research in the global South.     

An investigation on mixed housing-cycle structures and asymmetric tail dependences

This paper designs a Markov-switching mixture Copula-based model with a mixed Markov-transition mechanism to investigate the mixed housing-cycle structures and asymmetric tail dependences for the Pacific and Mountain divisions of American regional housing markets. The empirical results demonstrate four interesting findings. First, the Markov-switching process can capture the housing cycle of each housing market. Second, the evidence of the mixed Markov-switching specification indicates that the joint housing-cycle behaviors are related not only to the total dependence mechanism, but also to the independent mechanism. Specifically, each housing market has its own characteristics, and these characteristics play relatively more important roles in determining the joint housing-cycle pattern than do common factors related to the total dependence framework. Third, the two housing markets have asymmetric tail dependences. Tail dependence exists when two markets experience the same housing-cycle modes, but does not occur when two markets experience distinct housing-cycle modes. In addition, the intensity of tail dependence is stronger when two markets remain in recession mode, as opposed to when they remain in recovery mode. This finding suggests that downward price rigidity does not exist in regional housing markets. Fourth, the spillover effects between housing returns are asymmetric.     

Owner-occupied housing in a model of exchange rate determination

This study explores the effect of owner-occupied housing asset holdings on the short and long run determination of exchange rates. In the presence of consumption goods that can simultaneously serve as investment allocation subject to capital gains—such as owner-occupied housing—the general equilibrium model, based on the Obstfeld and Rogoff Redux model, produces exchange rate overshooting both in the presence and in the absence of price rigidities in the markets for final goods. This effect depends on the size of owner-occupied housing expenditures relative to total consumption expenditures, the initial level of housing market inflation, capital gains in housing and other parameters of the model. Depending on parameter values and initial conditions, the model supports the possibility for exchange rate dynamics that include either overshooting or undershooting.     

Comparative statics in markets for indivisible goods

This paper builds upon Caplin and Leahy (2014), which introduced a new mathematical apparatus for understanding allocation markets with nontransferable utility, as such covering the housing market and other markets for large indivisible goods. In the current paper we complete the study of comparative statics initiated therein. We introduce homotopy methods to characterize how equilibrium changes in response to arbitrary parameter changes. Generically, we show that there can be five and only five qualitatively distinct forms of market transition: Graft; Prune and Plant; Prune and Graft; Cycle and Reverse; and Shift and Replant. Our path-following methods identify new algorithms for computing market equilibria.     

Barriers to homeownership and housing quality: The impact of the international mortgage market

International mortgage markets can play an important role in stimulating affordable housing markets and improving housing quality in many countries. Unfortunately, international mortgage markets are often less developed than in the United State. This lack of development often translates into lower homeownership rates or lower housing quality. The problems faced in international mortgage markets include but are not limited to (1) legal systems that delay foreclosure proceedings, (2) incomplete or weak financial institutions, (3) high inflation, and (4) cultural barriers to mortgage market development and homeownership.