Tuuli VANHAPELTO will defend her thesis on Wednesday 17 May at 14:00 (Auditorium 6)
« Essays on the Housing Market »
Supervisors: Professor Thierry Magnac
To attend the conference, please contact the secretariat Christelle Fotso Tatchum
- Thierry Magnac, Toulouse School of Economics, UT Capitole, Supervisor
- Christian Hellwig, Toulouse School of Economics, UT Capitole, President
- Martial Dupaigne, University of Montpellier, TSE, examinator
- Eerola Essi, bank of Finland, advisor
- Natalia Khorunzinha, Copenhagen Business School, advisor
- Etienne Wasmer, New York University Adu Dhabi, reviewer
This doctoral thesis consists of three chapters that address different angles of the same fundamental question: What kind of equilibrium responses are there in the housing market following exogenous changes in market conditions? Understanding equilibrium responses of this sort is crucial for understanding how the housing market shapes the distribution of welfare in the economy, both via housing consumption and via housing wealth.
The first two chapters of this thesis deal with housing market polarisation between prospering urban areas and declining rural areas. This polarisation is part of larger regional change stemming from changes in the type of economic activities that create value. These changes, even if they may be good for the aggregate, can also have losers. In many post-industrial societies, even the the overall political environment has come to reflect differential access to economic opportunity between rural and urban areas.
The unifying tool of reasoning behind the first two chapters of this thesis is the use of spatial equilibrium models. The underlying idea of spatial equilibrium models is that households choose where to live, and this links locations together: changes in economic conditions in one location can also have effects in other locations through equilibrium forces. This could imply, for example, that urban growth not only benefits households in urban areas in relative terms, but could also harm households in rural areas in absolute terms.
In the first chapter of this thesis, I develop a quantitative framework for understanding which groups benefit from changes such as urban growth. The drivers of urban growth, such as amenity or income increases, could benefit either those who living in urban areas and those able to migrate to them, or those who own housing in urban areas, if the wage and amenity increases also push up rents and house values. The key forces which govern this incidence are related to household mobility and housing supply responsiveness, which are time-dependent. I incorporate a housing market in a spatial model to be able to distinguish between the short-run and long-run effects. I estimate that in Finland, growing household willingness to live in urban areas has led to substantially higher welfare gains to households in urban areas than in rural areas, and that those who own housing in urban areas have benefited and those who own housing in rural areas have suffered.
The second chapter of this thesis, coauthored with Thierry Magnac, aims at understanding cross-sectional variation in housing market liquidity. Housing liquidity, the ease at which houses are traded, is typically high in urban areas and low in declining areas. We develop a search model of a housing market which consists of multiple segments that are linked together via a spatial equilibrium condition determining local market tightness. We take the model to data in Finland and find that after an exogenous shock to house values, local price and sale time responses are very heterogenous.
The third chapter, coauthored with Essi Eerola, Teemu Lyytikäinen and Tuukka Saarimaa, addresses the welfare incidence of a housing subsidy policy through a policy evaluation framework. Housing subsidies can have unwanted consequences in case they increases rent levels, and thus benefit at least in part landlords instead of the subsidy recipients. We study a reform in Finland which increased housing subsidies in some, but not all, types of apartments. We rely on workhorse policy evaluation tools from modern empirical economics to make counterfactual claims about what would ahve happened to rents in the absence of the reform. We find that while after the reform, allowances increased in small apartments relative to larger apartments, their rents relative to larger apartments did not change. Thus, the reform seems to have benefited allowance recipients instead of their landlords.