Journal of Political Economy Vol. 129 No. 10 2021

The Production Function for Housing: Evidence from France

Pierre-Philippe Combes^1,2; Gilles Duranton³; Laurent Gobillon⁴

¹ Institut d'Etudes Politiques de Paris · ² Centre National pour la Recherche Scientifique et Technique (CNRST) · ³ California University of Pennsylvania · ⁴ PSE-CNRS

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.

DOI

10.1086/715076

Volume

129

Issue

10

Pages

2766-2816

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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