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A Regional Computable General Equilibrium (CGE) Model for HUD Policy Analysis: The Case of New York State Author: Rainer vom Hofe Dissertation School: Cornell University Pages: 225 Publication Date: August 2002 Availability: Access Number: 10754 Abstract: Traditionally, economists have relied on econometric models to estimate housing demand. Most of these studies focus on calculating income and price elasticities to relate changes in household income and dwelling prices to changes in the demand for housing. This dissertation research introduces an alternative approach to assessing the dynamics of a regional housing market, in particular, and its impacts on a statewide economy, in general, using the example of New York State. For this purpose, an economy-wide model of the class of Computable General Equilibrium (CGE) models has been developed. The New York State housing market is explicitly represented in this accounting framework through the residential construction sector, the owner-occupied housing sector, and the real estate market. The main idea behind this approach is that the housing market is not isolated from the rest of the economy. This means that housing policies will not only affect the housing market, but will also have spillover effects on other sectors in the economy and vice versa. The advantage of this economy-wide approach is that housing policies can be evaluated with respect to their impacts on the housing market as well as on other selected macroeconomic variables, such as gross state product, industry output, and household incomes. The main goal of this dissertation is to use the CGE framework to provide a comparison of the economy-wide impacts of selected supply and demand-side housing policies. The selected housing policies include mortgage rate reductions, property tax reductions, public housing investment, and allowance and voucher programs. Besides changes in housing consumption and housing investment, the focus is on the changes in key variables which describe the economy-wide impacts of selected housing policies. Among others, these are: industrial commodity production, statewide investment activities, household consumption and household income, mortgage rate, and regional export and import activities. In a second goal, this dissertation aims to demonstrate the use of a regional, statewide CGE model which is built on a commercially available Social Accounting Matrix by the Minnesota Implan Group. For this purpose, modifications to the traditional and national-level CGE framework and to the 1996 Social Accounting Matrix were made to account for regional characteristics of New York State. The regional New York State CGE model developed for this research is neoclassical in spirit, has its roots in Walrasian general equilibrium theory, is static by nature, and follows closely the structuralistic modeling tradition of trade-focused CGE models. This dissertation clearly demonstrates that the versatility of CGE models make it an appropriate policy simulation tool for evaluating the regional economic impacts of housing policies. The strengths of the CGE framework - such as price-endogeneity and the nearly unlimited flexibility to incorporate equations describing economic relationships - allows the CGE framework to be easily adopted to any U.S. region or policy-relevant problem, including environmental policy and fiscal impact analysis. |
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