The Production Function for Housing: Evidence …
The Production Function for housing : Evidence from FrancePierre-Philippe Combes Aix-Marseille School of Economics and Sciences PoGilles Duranton University of PennsylvaniaLaurent Gobillon Paris School of EconomicsWork in progress: December 2015Abstract: We propose a new non-parametric approach to estimatethe Production Function for housing . Our estimation treats output as alatent variable and relies on the first-order condition for house parcels of similar sizes, we compute housing by summing across themarginal products of non-land inputs. In turn, differences in non-landinputs are caused by differences in land prices that reflect differences inthe demand for housing across locations. We implement our methodol-ogy on recently-built single-family homes in France. We find that theproduction Function for housing is reasonably well approximated by aCobb-Douglas Function and close to constant returns. After correctingfor differences in user costs between different inputs, we obtain a shareof land of about 20% in the Production of words: housing , Production :r14, r31, r32 We thank seminar and conference participants and in particular Nate Baum-Snow, Felipe Carozzi, Tom Davidoff,Uli Doraszelski, Jean-Franois Houde, and Tony Yezer for their comments and suggestions.
1. Introduction We propose a new non-parametric approach to estimate the production function for housing. Our estimation treats output as a latent variable and relies on the rst-order condition for house builders.
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