Grossmann, Volker Schäfer, Andreas Steger, Thomas M.
Year of Publication:
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: Housing and the Macroeconomy C06-V1
We theoretically investigate the effects of interregional labor market integration on the dynamic interaction between migration flows, capital formation, and the price for housing services. The nature of this interaction depends on initial conditions at the time of labor market integration. In an initially capital-poor economy, there may be a reversal of migration flows during the transition to the steady state, like observed in Eastern Europe after 1990. In a high-productivity country which attracts immigrants, the price for housing services and the rental rate of land increase along with (residential) capital investments. Welfare effects are heterogeneous: whereas landless individuals lose from immigration because of increases in the price for housing services, landowners may win because of an increasing rental rate of land.