Is Accra a Superstar City?

A recent study of house price behavior in U.S. cities by Gyourko, Mayer, and Sinai (2006) raises questions about so-called superstar cities in which housing is so inelastically supplied that it becomes unaffordable, as higher-income families outbid...

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Bibliographic Details
Main Authors:	Buckley, Robert M., Mathema, Ashna S.
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ADVERSE EFFECTS ADVERSE SELECTION AFFORDABLE HOUSING ANNUAL INFLATION RATE ASSET PRICING BALANCE SHEETS BANKING SECTOR BANKS BENCHMARKING BORROWING CALCULATION CAPITAL ADEQUACY CAPITAL FLIGHT CAPITAL GAINS CASH TRANSFERS CITIES CITY SIZE COMMUNITIES COMPETITIVENESS COST INCREASES COST OF LIVING COUNTRYSIDE DEVELOPMENT BANK DEVELOPMENT ECONOMICS DIRECT INVESTMENT DIRECT INVESTMENTS DISCOUNT RATE EARNINGS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC ORDER ECONOMIC RESEARCH ECONOMICS ELASTICITY EMPLOYMENT OPPORTUNITIES EQUATIONS FEDERAL RESERVE FEDERAL RESERVE BANK OF NEW YORK FINANCIAL DEPTH FINANCIAL SECTOR FINANCIAL SECTOR DEVELOPMENT FINANCIAL SECTORS FINANCIAL SYSTEM GDP GROSS DOMESTIC PRODUCT GROWTH RATE HOMEOWNERSHIP HOUSE PRICES HOUSEHOLD EXPENDITURE HOUSEHOLD INCOME HOUSEHOLD STRUCTURE HOUSEHOLDS HOUSES HOUSING HOUSING AFFORDABILITY HOUSING CENSUS HOUSING CONDITIONS HOUSING COSTS HOUSING DEMAND HOUSING DEVELOPMENT HOUSING FINANCE HOUSING MARKET HOUSING MARKETS HOUSING PRICES HOUSING PROBLEMS HOUSING SUPPLY INCOME INCOME DISTRIBUTION INCOME ELASTICITY INCOME ELASTICITY OF DEMAND INCOME GROUPS INCOME INCREASE INCOME LEVELS INDUSTRIAL ECONOMICS INFLATION INFLATION RATE INFORMAL SETTLEMENTS LABOR MARKETS LAND DEVELOPMENT LAND MANAGEMENT LAND USE LARGE CITIES LIVING CONDITIONS LIVING COSTS LIVING STANDARDS LOCAL NEWSPAPER LOCALITIES LOW INCOME LOW-INCOME LOWER INCOME LOWER INCOMES LOWER-INCOME FAMILIES
Online Access:	http://documents.worldbank.org/curated/en/2007/12/8891391/accra-superstar-city http://hdl.handle.net/10986/7521

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Summary:	A recent study of house price behavior in U.S. cities by Gyourko, Mayer, and Sinai (2006) raises questions about so-called superstar cities in which housing is so inelastically supplied that it becomes unaffordable, as higher-income families outbid residents. We consider the case of Accra, Ghana, in this light, estimating the elasticity of housing supply and discussing the implications for growth and income distribution. There is not a great deal of data available to examine trends in Accra, so our method is indirect. First, we use a variant of the traditional monocentric city model to calculate the elasticity of Accra's housing supply relative to those of other similarly-sized African cities. This suggests that housing supply responsiveness is much higher elsewhere. This muted supply responsiveness is consistent with the observed higher housing prices. Second, we estimate a number of traditional housing demand equations and reduced form equations. Placing a number of restrictions on the equations allows us to infer Accra's housing supply elasticity. Taken together, our approaches suggest that lower-income families in Accra have such poor housing conditions because the market is extremely unresponsive to demand. Although the outcomes we have traced-high housing prices and low quality-are not unusual relative to the other developed country superstar cities, they are extreme. The welfare costs are considerable, so much so that in addition to direct housing market effects, these policies also appear to have potentially significant implications for the achievement of more equitable growth.

Is Accra a Superstar City?

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