Yin Germaschewski and her colleague Shu-Ling Wang published their joint work, titled "Distributional Effects of Non-Resident Investors on the Housing Market and Welfare", at Review of International Economics this Spring, a high quality journal in the international economics field. This paper studies the distributional effects of non-resident housing investment on residents'
consumption and welfare.
View the paper: https://onlinelibrary.wiley.com/doi/10.1111/roie.12544
Abstract
This paper studies the distributional effects of nonresident housing investment on residents' consumption and welfare in a dynamic stochastic general equilibrium model with two types of agents: savers and borrowers. The model is estimated with Bayesian methods applied to Taiwan. Three main results emerge. First, nonresident housing investment raises house prices and rent, validating policymakers' concerns about housing affordability. Second, higher house prices boost homeowners' property values, which strongly promotes consumption. Third, higher investment by nonresidents increases government tax revenues, the allocation of which has important welfare consequences across agents. Using tax revenues to subsidize residents through income tax reduction produces the largest welfare improvement, followed by a provision of public goods. Increasing the tax deductibility of mortgage interest is beneficial to borrowers, while allotting tax revenues to supply public capital results in the greatest welfare losses to savers.
