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The purchase price of a new house is comprised of essentially two components: the price of the structure and the price of the land. Given that the supply of land available for residential construction in urban areas is not perfectly elastic, it is inevitable that a rising demand for new homes will drive up the price of land and consequently the price of housing. Less clear is what effect, if any, increased demand for the structure component of new housing has upon the long-run price of housing. This paper examines whether the demand for the
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James R. Follain (1979) studied this question.
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