A Housing Supply Function for Iran

Abstract

A housing supply function for private sector has been estimated for the
period of 1985-1999. The model was specified, using Lucas supply theory
and by including internal adjustment costs in producer's decision f or
production or inv estment. The distin ctive feature of this model is the
utilization. of investment role in housing sector similar to other factors in
production function.
The results indicate that the supply of that period was more subject to
two main [actors. i.e. housing prices and opportunity costs. The price
elasticity of housing supply and the elasticity of housing supply with respect
to opportunity cost have been calculated as 3.96 and - 3.5 respectively.
The low sensitivity of supply with respect to other factors such as wages,
may be explained as du e to relatively low growth of wages compared to the
growth of general price level and housing prices and high supply of
unskilled workers.
The low elasticity of housing supply with respect to financial credit is
du e to insufficient ceiling of financial credit compared to the cost of
purchasing and production of housing