lecture12 - Empirical Research on Housing Real Estate...

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Unformatted text preview: Empirical Research on Housing / Real Estate Glaeser and Gyourko (2005) • Lots of urban models (e.g. Roback model) ignore fact that housing stock is durable good. • Leads to misperception that cities will respond to positive and negative shocks in same way. • But urban decline is not the mirror image of urban growth. • Easy to build when prices go up. • Hard to unbuild when they go down. Model Dynamics (positive shock) P Q Demand increase leads to price increases and new construction. Min Const. Cost P Q Another (smaller) adjustment next period. Next period’s supply locus. Min Const. Cost Model Dynamics (positive shock) P Q New long run equilibrium Min Const. Cost Model Dynamics (positive shock) “Impulse Response” (positive shock) Time P Time Q Min Const. Cost Model Dynamics (negative shock) P Q Reduction in price leads to Price decreases but no change in quantity. Min Const....
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