Housing quality differentials in urban areas

Article Abstract:

H.S. Houthakker postulated an approach to the quality variation problem and consumer behavior theory based on an assumption that commodities' characteristics provide utility to individuals. Houthakker's individual choice theory has been extended by economists to analyze consumer behavior. J. Tinbergen made advances in formulating and solving hedonic equilibrium models, which was extended by D. Epple to treat commodities. An equilibrium model for differentiated good housing is presented that corrects for deficiencies in the Tibergern-Epple paradigm. The equilibrium model was applied to a study of the willingness to pay for air quality improvements in Chicago, IL; Cleveland, OH; Dallas, TX; Houston, TX; and Indianapolis, IN. Research results revealed that the structural and standard nonstructural approaches gave vastly different benefit figures and that there were significant distributional effects implied in uniform air quality improvement.

Air quality, Tinbergen, J., Epple, D., Houthakker, H.S.

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Housing demand and real interest rates

Article Abstract:

The effect of inflation on housing demand in the 1970s was studied using an indirect model of housing demand to test the validity of neoclassical and other models of housing demand. Previous research has indicated that inflation and high nominal interest rates likely had a direct affect on housing demand by creating cash flow problems due to high levels of mortgage payments. Regressions were conducted on several measures of real estate related to different levels of expected inflation. Research results revealed minimal support for the hypothesis that the effects of inflation and high nominal interest rates on cash flow in the 1970s affected housing demand.

Real estate, Interest rates, Real property

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