Abstract: In the United States, the percentage standard deviation of residential investment
is more than twice that of non-residential investment. In addition, GDP,
consumption, and both types of investment co-move positively. We reproduce these
facts in a calibrated multi-sector growth model where construction, manufacturing
and services are combined, in different proportions, to produce consumption, business
investment and residential structures. New housing requires land in addition to
new structures. The model can also account for important features of industry-level
data. In particular, hours and output in all industries are positively correlated, and
are most volatile in construction.
Keywords: Residential investment, co-movement, home production, multisector models
Full paper (566 KB PDF)
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Last update: February 19, 2004
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