Estimating the Price Elasticity of New Housing Supply in Iran (Provincial study)

Document Type : Original Article


1 Assistant Professor of Economics, Faculty of Economics, Allameh Tabataba'i University

2 MA in Economics, Faculty of Economics, Allameh Tabataba'i University


Despite extensive studies on the housing market, most of these studies are related to housing demand and not on housing supply. However, identifying the factors affecting supply, especially in the short run and medium term, are key issues in this sector. In this regard, this research has been tried to estimate the price elasticity of the supply of housing according to provincial data for the period of 14 years (2000-2013) by studying the factors affecting the supply of new housing in Iran. For this purpose, using partial equilibrium of housing market, housing supply and demand functions are estimated using the simultaneous equation econometric method and panel data. Given the dynamism of the demand equation, the Generalized Moment Method (GMM) has been used to estimate the parameters. The results show that the price elasticity of the supply of housing in the short run is 0.25 and in the medium term is 0.5. Therefore, due to the lack of supply of housing, shocks on demand side will lead to a sharp increase in prices in this sector.


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