Housing and the Economy: After the Short Run

24 Pages Posted: 26 Jul 2007

See all articles by Robert Van Order

Robert Van Order

University of Michigan - Stephen M. Ross School of Business; University of Aberdeen

Date Written: January 2007

Abstract

Much of the attention regarding the role of housing and the economy has been concerned with traditional macroeconomic business cycle problems, such as the role of housing as a stabilizer or destabilizer in the macro economy in the "short run." Here the focus is on the periods beyond that. In particular, housing is a capital good, a part of the capital stock, which is a substitute for other uses of capital, and the paper focuses on adjustment of housing and other capital after the short run. A central point of the paper is that the medium and long term impacts of policy, and other, shocks on housing can be quite different from the short run effects. Short run impacts can be reversed in the medium run. For instance, the currently most popular and largest form of tax subsidy for housing, not taxing imputed rent, will in initially lead to more housing and less business capital, but after the initial shock business capital growth will accelerate and eventually return to its initial level, but the housing stock will be higher.

Keywords: Housing, Capital, Tax Policy

JEL Classification: D91, R31

Suggested Citation

Van Order, Robert, Housing and the Economy: After the Short Run (January 2007). Ross School of Business Paper No. 1087, Available at SSRN: https://ssrn.com/abstract=1002757 or http://dx.doi.org/10.2139/ssrn.1002757

Robert Van Order (Contact Author)

University of Michigan - Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

University of Aberdeen

Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

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