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Migration, capital formation, and house prices

Author

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  • Grossmann, Volker
  • Schäfer, Andreas
  • Steger, Thomas M.

Abstract

We investigate the effects of interregional labor market integration in a twosector,overlapping-generations model with land-intensive production in the nontradable goods sector (housing). To capture the response to migration on housing supply, capital formation is endogenous, assuming that firms face capital adjustment costs. Our analysis highlights heterogeneous welfare effects of labor mark etintegration. Whereas individuals without residential property lose from immigration due to increased housing costs, landowners may win. Moreover, we show how the relationship between migration and capital formation depends on initial conditions at the time of labor market integration. Our model is also capable to explain the reversal of migration during the transition to the steady state, like observed in East Germany after unification in 1990. It is also consistent with a gradually rising migration stock and house prices in high-productivity countries like Switzerland.

Suggested Citation

  • Grossmann, Volker & Schäfer, Andreas & Steger, Thomas M., 2013. "Migration, capital formation, and house prices," Working Papers 116, University of Leipzig, Faculty of Economics and Management Science.
    • Handle: RePEc:zbw:leiwps:116
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    References listed on IDEAS

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    1. Andreas Schäfer & Thomas Steger, 2014. "Journey into the Unknown? Economic Consequences of Factor Market Integration under Increasing Returns to Scale," Review of International Economics, Wiley Blackwell, vol. 22(4), pages 783-807, September.
    2. Saiz, Albert, 2007. "Immigration and housing rents in American cities," Journal of Urban Economics, Elsevier, vol. 61(2), pages 345-371, March.
    3. Volker Grossmann & David Stadelmann, 2013. "Wage Effects of High-Skilled Migration: International Evidence," The World Bank Economic Review, World Bank, vol. 27(2), pages 297-319.
    4. Grossmann, Volker & Stadelmann, David, 2011. "Does international mobility of high-skilled workers aggravate between-country inequality?," Journal of Development Economics, Elsevier, vol. 95(1), pages 88-94, May.
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    Cited by:

    1. Volker Grossmann, 2021. "How immigration affects investment and productivity in host and home countries," IZA World of Labor, Institute of Labor Economics (IZA), pages 292-292, October.
    2. Grossmann, Volker & Schäfer, Andreas & Steger, Thomas & Fuchs, Benjamin, 2017. "Reversal of migration flows: A fresh look at the German reunification," Journal of International Economics, Elsevier, vol. 109(C), pages 1-15.
    3. Bayar, Mehmet, 2016. "The impact of cultural diversity on the German housing market," Ruhr Economic Papers 662, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

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    More about this item

    Keywords

    Capital formation; House prices; Land distribution; Migration; Welfare;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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