The Production Function for Housing: Evidence from France
Résumé
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.
Domaines
Economies et finances
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2021_combes_duranton_gobillon_the_production_function_of_housing_evidence_from_france_with_supplemental_material.pdf (908.53 Ko)
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