Estimating the housing production function with unobserved land heterogeneity (opens in new tab)

This paper develops a method for estimating housing production functions when builders choose capital after observing local conditions that are unobserved by the econometrician. Because observed capital variation reflects both technological substitution and endogenous responses to these conditions, existing estimators can transmit unobserved heterogeneity into the estimated production function. The method treats the unobserved local conditio...