X!kyu的ml;A-.doc

場次：1A-1 Housing Production and Factor Demand: A Cost Function Approach by Chu-Chia Lin* Abstract In this paper, we build up a translog function first, assuming there are only two kinds of input, namely land and capital. Applying a data set from the Land Bank of Taiwan, we estimate the translog cost function with some standard restrictions. In order to check how the production corresponds to the prices of land and capital, we then estimate the function of factor shares. Finally, the price elasticity of factor demand for land and for capital are computed by the estimated factor share functions. We find that both of the demand elasticity and cross elasticity are quite low, which shows that housing constructors in Taiwan do not have much room to substitute land and capital in housing production. Keywords: housing production, cost function, elasticity of factor demand 1. Introduction As a factor input of housing production, land is quite different from other factors, such as labor, machines, and construction materials. It is not only that the price of land is quite high comparing to other factor prices, but that the price of land usually has a different pattern of cycle . On the other hand, land as an input for housing production is usually constrainted by certain zoning policies, such as coverage ratio and floor-space ratio. Owing to these special features of land as an input in housing production, it will be very interesting to see the substitution of land and other factors in housing production. There are quite a few studies on estimating the elasticity of substitution between land input and capital input. For example, Koenoker(1972), McDonald(1981), Jackson and Kaserman(1984), and Thorsnes(1997) have provided excellent empirical studies on estimating the elasticities of substitution between land and capital in housing production. Clapp(1996) showed that the measuremeant error of land and capital could result in housing production. While most