Article:

Why Are Housing and Services More Expensive in Rich Countries than in Poor Ones? A Model of Neighborhood Housing Effect and its Evidence

Author: Huayi Yu, Xiang Tang, Yinggang Zhou

Start Page: 627
End Page: 662
Volume: 23
Issue Number: 1
Year: 2020
Publication: International Real Estate Review

Abstract:

This paper examines why housing and services are more expensive in rich countries than in poor ones. We propose the Rich Neighborhood Housing Effect (RNHE), which explicitly allows for local labor force heterogeneity with a coherent supply-demand framework that incorporates demand-side factors such as the Linder effect. We also develop a contemporary RNHE model that predicts different behavior of the national price level between high-income and low-income countries. These predictions are confirmed by the panel data from 1990 to 2010 and simultaneous equation estimations. These results are compelling evidence in favor of the RNHE model over the Balassa-Samuelson model.

Keywords

Balassa-Samuelson Model, Rich Neighborhood Housing Effect, National Price Levels, Housing and Services, Linder Effect

Back to Previous Page

All articles listed here are available for download in portable document format (PDF).