Estimating Elasticity of Substitution between Land and Capital in a Median City (City of Dorud as a Case Study)

Authors
naser yarmohamadian
Bahar Salarvand
Art University of Isfahan
10.21859/jemr.11.41.231
Abstract
Some unique characteristics of housing goods such as spatial dependency, heterogeneity and durability make housing market analysis different from ordinary goods. However principles in ordinary goods market such as profit maximization are used by developer in housing market. one of the housing market characteristic is that land as a most important input for housing services production has low demand elasticity because of its scarcity. This always makes housing services developer in housing market to substitute capital (construction materials) instead of land. In economics, for demonstrating this kind of substitution, elasticity of substitution is used. Since land has a local market and the intensity of scarcity in cities is different so there are different numbers for elasticity of substitution in different cities and regions. This paper is trying for estimating elasticity of substitution n a median city by gathering data survey. The results show elasticity of substitution between land and capital in housing services production in city of Dorud is 1/04 percent in 2018.
Keywords
Elasticity of Substitution
Land and Capital
Housing Services
Median City
Dorud
Arman, A, & Azari Beni, B. (2019). The Effects of the Housing Shock on Income Dynamics in Iran: an Application of Data Pseudo-Panel. 9 (34) : 7-30 (in Persian). [DOI:10.29252/jemr.9.34.7]
Arman, A, & Azari Beni, B. (2019). The Effects of the Housing Shock on Income Dynamics in Iran: an Application of Data Pseudo-Panel. 9 (34) : 7-30 (in Persian). [DOI:10.29252/jemr.9.34.7]
Blackorby, C., & Russell, R. (1975). The Morishima Elasticity of Substitution, Discussion. Economics, University of California, San Diego. 1-75.
Blackorby, C., & Russell, R. (1975). The Morishima Elasticity of Substitution, Discussion. Economics, University of California, San Diego. 1-75.
Davidoff, Th. (2005). A house price is not a home price: land structures and the Macro economy, Hass University of business.
Davidoff, Th. (2005). A house price is not a home price: land structures and the Macro economy, Hass University of business.
Erol, I., & Guzel, A. (2006). The elasticity of capital - land substitution in the housing construction sector of e rapidly urbanized city. Evidence from Turkey, Review of urban & Regional development studies. 18(2) : 85-101. [DOI:10.1111/j.1467-940X.2006.00113.x]
Erol, I., & Guzel, A. (2006). The elasticity of capital - land substitution in the housing construction sector of e rapidly urbanized city. Evidence from Turkey, Review of urban & Regional development studies. 18(2) : 85-101. [DOI:10.1111/j.1467-940X.2006.00113.x]
Frondel, M. (2010). Substitution elasticities: A theoretical and empirical comparison, Discussion Paper.
Frondel, M. (2010). Substitution elasticities: A theoretical and empirical comparison, Discussion Paper.
Gabriel M, A., & Daniel P, M. (2014). New estimates of the elasticity of substitution of land for capital.
Gabriel M, A., & Daniel P, M. (2014). New estimates of the elasticity of substitution of land for capital.
Ghaderi, J. (2003). Estimation of housing demand in urban areas of Iran. Journal of Economic Research Tarbiat Modares University. (2) :112-134 (in Persian).
Ghaderi, J. (2003). Estimation of housing demand in urban areas of Iran. Journal of Economic Research Tarbiat Modares University. (2) :112-134 (in Persian).
Gholizade, A., Noroozonejad, M. (2019). Dynamics of Housing Prices and Economic Fluctuations in Iran with the Approach of Dynamic Stochastic General Equilibrium (DSGE). 9(36) : 37-74 (in Persian). [DOI:10.29252/jemr.9.36.37]
Gholizade, A., Noroozonejad, M. (2019). Dynamics of Housing Prices and Economic Fluctuations in Iran with the Approach of Dynamic Stochastic General Equilibrium (DSGE). 9(36) : 37-74 (in Persian). [DOI:10.29252/jemr.9.36.37]
Hilber, C. (2010). New housing supply and the dilution of social capital. Journal of Urban Economics, 67(3) : 419- 437. [DOI:10.1016/j.jue.2009.12.001]
Hilber, C. (2010). New housing supply and the dilution of social capital. Journal of Urban Economics, 67(3) : 419- 437. [DOI:10.1016/j.jue.2009.12.001]
Khalili Araghi, M., & Mousavi, S. (2000). A Housing Supply Function for Iran. Journal of Economic Research (Tahghighat- E- Eghtesadi), 35(2), 1-29 (in Persian).
Khalili Araghi, M., & Mousavi, S. (2000). A Housing Supply Function for Iran. Journal of Economic Research (Tahghighat- E- Eghtesadi), 35(2), 1-29 (in Persian).
Khoshakhlagh, R., Farahmand, S., Gharakhani, S., & Gharakhani Dehsorkhi, S. (2016). An Estimation of Housing Supply Function for Urban and Rural areas in Isfahan province (1991-2011). Urban Economics, 1(1), 37-53 (in Persian).
Khoshakhlagh, R., Farahmand, S., Gharakhani, S., & Gharakhani Dehsorkhi, S. (2016). An Estimation of Housing Supply Function for Urban and Rural areas in Isfahan province (1991-2011). Urban Economics, 1(1), 37-53 (in Persian).
Koenker, R. (1972). An empirical note on the elasticity of substitution between land and capital in a monocentric housing market. Journal of regional science. 12(2). [DOI:10.1111/j.1467-9787.1972.tb00351.x]
Koenker, R. (1972). An empirical note on the elasticity of substitution between land and capital in a monocentric housing market. Journal of regional science. 12(2). [DOI:10.1111/j.1467-9787.1972.tb00351.x]
Malpezi, S., & Vandell, K. (2002). Does the low-income housing tax credite increase the supply of housing? Journal of Housing Economics, 11(4) : 360-380. [DOI:10.1016/S1051-1377(02)00123-7]
Malpezi, S., & Vandell, K. (2002). Does the low-income housing tax credite increase the supply of housing? Journal of Housing Economics, 11(4) : 360-380. [DOI:10.1016/S1051-1377(02)00123-7]
McDonald, J., Daniel P, M. (2010), Urban Economics and Real Estate: Theory and Policy, 2nd Edition, Wiley.
McDonald, J., Daniel P, M. (2010), Urban Economics and Real Estate: Theory and Policy, 2nd Edition, Wiley.
Mehregan, N., Tartar, M. (2014). Short-term and long-term effects of costs on housing prices in Tehran. Quarterly Journal of Housing Economics. 50: 45-68 (in Persian).
Mehregan, N., Tartar, M. (2014). Short-term and long-term effects of costs on housing prices in Tehran. Quarterly Journal of Housing Economics. 50: 45-68 (in Persian).
Rondinelli, D.A. (1983). Secondary Cities in Development Countries. Policies for Diffusing Urbanization.
Rondinelli, D.A. (1983). Secondary Cities in Development Countries. Policies for Diffusing Urbanization.
Revankar, N. (1971). A class of variable elasticity of substitution production functions. Econometric. 39(1) : 61-71. [DOI:10.2307/1909140]
Revankar, N. (1971). A class of variable elasticity of substitution production functions. Econometric. 39(1) : 61-71. [DOI:10.2307/1909140]
Shakarami, Z., Yarmohamadian, N., & Hayatnia, A. (2018). Estimating the Elasticity of Substitution of Land and Capital in the Production of Housing (Case Study Ilam City). M.A. Thesis on Urban Economics. Art University Of Isfahan (in Persian).
Shakarami, Z., Yarmohamadian, N., & Hayatnia, A. (2018). Estimating the Elasticity of Substitution of Land and Capital in the Production of Housing (Case Study Ilam City). M.A. Thesis on Urban Economics. Art University Of Isfahan (in Persian).
Smith, R. (1969). Spatial Dynamics in Multi-Family Housing Investment Behavior: A Case Study of Ann Arbor, Michigan," unpublished. M.A. thesis in City Planning, University of Michigan.
Smith, R. (1969). Spatial Dynamics in Multi-Family Housing Investment Behavior: A Case Study of Ann Arbor, Michigan," unpublished. M.A. thesis in City Planning, University of Michigan.
Sohaili, K., Fattahi, S., & Ovaisi B. (2014). A Survey of Factors Affecting Fluctuations of Housing Prices in Kermanshah. Journal of Economic Research Tarbiat Modares University. 14 (2) :41-67 (in Persian).
Sohaili, K., Fattahi, S., & Ovaisi B. (2014). A Survey of Factors Affecting Fluctuations of Housing Prices in Kermanshah. Journal of Economic Research Tarbiat Modares University. 14 (2) :41-67 (in Persian).
Thisse, Jacques-Francois. (2016). The Competitive Paradigm in Spatial Economics. SRN Electronic Journal. 10.2139/ssrn.2844139. [DOI:10.2139/ssrn.2844139]
Thisse, Jacques-Francois. (2016). The Competitive Paradigm in Spatial Economics. SRN Electronic Journal. 10.2139/ssrn.2844139. [DOI:10.2139/ssrn.2844139]
Varian, H. (2008). Microeconomic Analysis. Translated by Seyed Reza Hosseini, Ney Publications, Tehran (in Persian).
Varian, H. (2008). Microeconomic Analysis. Translated by Seyed Reza Hosseini, Ney Publications, Tehran (in Persian).
Zare, M. (1994). Estimation of substitution and price elasticities of steel and cement in the construction sector of Iran. M.A. Thesis on Economics. Shahid Beheshti University (in Persian).
Zare, M. (1994). Estimation of substitution and price elasticities of steel and cement in the construction sector of Iran. M.A. Thesis on Economics. Shahid Beheshti University (in Persian).