Rune Wigren

Production milieu and competitive advantages

In agricultural societies the population tends to concentrate on sites in response to the fertility of land. In postagricultural societies we find new forms of “fertility” differentiation over space. Both within and across urban regions of various sizes one can observe how the competitive advantages differ between locations. We relate such distributions of location advantages to the variation of attributes of each location’s production milieu. In this chapter we present a series of Swedish studies examining how the production milieu influences the performance of manufacturing and service industries, as well as the entire regional economy. This introductory section emphasises how certain persistent observations demand a modification or renewal of economic theory. We also outline the types of models employed in the Swedish analyses of the production milieu during the period 1970–1995.

The robustness of the causal and economic relationship between construction flows and economic growth: evidence from Western Europe

Our main objective is to analyse whether we have a problem of parameter heterogeneity across countries and over time in the estimation of the relationship between infrastructure investments and economic growth. The research approach concerning causality and the estimating of the long-run equilibrium is based on the error-correction model. The problem of parameter heterogeneity is handled by the use of interaction terms. The result indicates that residential construction Granger causes Gross Domestic Product (GDP) in the short and long run and it seems likely that the interaction term indicating high unemployment do add some explanation power to the model. This is not true when it comes to infrastructural and other building construction and its impact on economic growth. A high housing stock per capita seems to reduce the short-run effect. This implies that residential construction seems to have a larger effect if the accumulated residential stock is on a low level. The speed of adjustment to long-run equilibrium differs considerably between a country with a low residential capital stock and a country with a high-capital stock. Moreover, high owner occupation rates seem to be associated with a stronger relationship between residential construction and economic growth.

Housing Stock and Price Adjustments in 12 West-European Countries between 1976 and 1999

Housing investment has both a direct and an indirect effect on economic growth. It is therefore of great importance to understand the mechanisms underlying the housing market. This paper uses an error‐correction model to analyse the dynamics of the housing markets in 12 West European countries for the period 1976–99. The empirical results indicate that it is, to some degree, possible to consider the European housing market as one market. The relationships between housing stock and its macroeconomic determinants are robust across countries. Furthermore, the results show that the price and cost elasticity of the housing supply are low. Shocks on demand and supply have small effects on the housing stock (low speed of adjustment on quantity). On average, shocks take 4 years before being fully incorporated into the housing stock. On the other hand, shocks have a substantial effect on prices (high speed of adjustment on price). Supply‐side and demand‐side shocks have an instant effect on housing prices.

House prices in Sweden: The significance of attributes

The paper describes an empirical study of house prices in Sweden. The purpose is to assess marginal (hedonic) prices of different characteristics of single family houses and to indicate regional variations in these. The method used—regression of house prices on attributes—allows us also to calculate regional prices of a house with a given set of attributes, i.e. comparing prices of identical houses in different regions. On the basis of a large number of sales it is possible to conclude that the real estate markets of Sweden do not differ qualitatively from those of USA and Great Britain. The same types of characteristics seem to have hedonic prices. The most important are the size of the building and the lot, the age of the real estate, the quality of its interior, and its location both in terms of accessibility and social environment. Regional variation in prices of ‘identical’ houses are substantial. The price level of the most expensive region is three times the price level of the cheapest region. Impl...

House price indexes: The hedonic technique, and some other methods applied to price movements of single family houses in Sweden

The fact that the quality of goods changes over time has always complicated price index calculations. The hedonic technique was originally developed to tackle this problem. From a theoretical point of view the technique offers the best approach to the estimation of changes in ‘pure’ price of single family houses. It is, however, rather expensive and nowhere in abundant use. The purposes of this paper are on one hand to investigate whether the hedonic method may be substituted for some simpler and cheaper method, and on the other to examine the reliability of the ‘official’ price index of Sweden. This is done by comparing the empirical results of different methods with the price estimates of the hedonic technique. The estimated price changes seem to be very sensitive to the method used and none of the alternative methods presented in the paper is capable of superseding the hedonic technique.

The Impact of Competition, Subsidies, and Taxes on Production and Construction Cost: The Case of the Swedish Housing Construction Market

Few empirical studies focus on developing data and analyses on the factors that influence the decision making process of builders, developers and landlords. Interest subsidy, taxes, and competition are some of the factors that can influence the level of construction or production costs and ultimately the price of the housing units produced. Different subsidy schemes and value-added taxes (VAT) have been used as tools to increase housing construction in Sweden. However, their effect on costs of the housing stock has not been rigorously examined in the current housing supply literature. The aim of this paper is to investigate the relationship between production and construction cost and its determinants especially their relationship to different subsidy schemes and value-added taxes. In our econometric analysis, we utilize a quarterly panel data that covers 1975–2004. Our results suggest that there is a positive relationship between subsidies and construction cost and inverse relationship to value added taxes. This could explain why few companies within the housing construction industry raise the cost of production since these companies could manage to transfer some of the tax burden from themselves to the housing developers. Paper goes on to discuss common practices of construction companies that affects production costs.

Dynamic efficiency: A best‐practice approach to the Swedish construction industry

Best‐practice technique as a concept was developed for the purpose of analysing the structure of manufacturing industries. In my article I argue that the concept may also be applied to the construction industry, though the rationale differs somewhat. Instead of considering the technique embodied in the real capital, one should see it as part of the organization in Marshalls meaning. This would lead to different unit operating costs and different labour productivity among firms competing in the same market. The extent of the variation of the labour productivity during the period 1979–84 is shown in the paper. Productivity functions of different efficiency groups are estimated in order to establish the best‐practice production function. In that process it is also shown that during the period 1979–84 the efficiency of the firms using the best‐practice technique grows faster than the efficiency of all other firms.