Work

The Production Function for Housing: Evidence from France

Year: 2021

Type: article

Abstract: We propose a new nonparametric approach to estimate the production function for housing. Our estimation treats output as a latent variable and relies on a first-order condition for profit maximization combined with a zero-profit condition. More desirable locations command higher land prices and, in turn, more capital to build houses. For parcels of a given size, we compute housing production by summing across the marginal products of capital. For newly built single-family homes in France, the production function for housing is close to constant returns and is well, though not perfectly, approximated by a Cobb-Douglas function with a capital elasticity of 0.65.

Source: Journal of Political Economy

DOI: 10.1086/715076

Authors: Pierre-Philippe Combes, Gilles Duranton, Laurent Gobillon

Institutions: Centre National de la Recherche Scientifique, Institut d'Etudes Politiques de Paris, University of Pennsylvania, Paris School of Economics

Language: English

Topic: Housing Market and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: Agence Nationale de la Recherche

Awards: Ecole d'Economie de Paris, Développement et construction d'un Centre d'Accès Sécurisé Distant aux données confidentielles (CASD) pour la recherche française en sciences sociales et en économie.