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The role of demand in land re-development

Carozzi, Felipe (2018) The role of demand in land re-development. CEP Discussion Papers, CEPDP1549. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

Several governments throughout the world apply policies aimed to re-mediate and recover vacant or idle land for other uses. This paper provides estimates of the price sensitivity of redevelopment, a crucial parameter for the success of these policies. My cross-sectional estimates measure how prices affect long-run conversion of unused or underused previously developed land in England. In order to solve the classical problem in the estimation of supply elasticities from market outcomes, I exploit school quality information and school admission boundaries to obtain a demand-shifter that is orthogonal to re-development costs. Estimation is conducted using a boundary discontinuity design based on this instrument. Results show that the probability of re-development is effectively sensitive to housing prices. Estimates indicate that a 1% increase in housing prices leads to a 0.07 percentage point reduction in the fraction of hectares containing brownfield land. Back-of-the envelope calculations using these estimates suggest that a large increase of 21% in prices across locations, or an equivalent subsidy, would be required to eliminate most of these vacant or underused land plots.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2018 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD100 Land Use
JEL classification: R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R14 - Land Use Patterns
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R31 - Housing Supply and Markets
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Series: Working Papers > CEP Discussion Papers
Date Deposited: 27 Jun 2018 09:09
Last Modified: 27 Jun 2018 09:09
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/88700

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