Abstract
It is often claimed that Korea has invested too little in housing during the period of rapid urbanization. In this paper, we first describe the trend of housing investment in Korea and identify the determinants of the share of nations's output allocated to housing. Then we build and estimate a simple two-sector general equilibrium model similar to Mills (1987) to test the hypothesis that Korea has under-invested in housing. We conclude that the hypothesis is verified by the 1970-86 data and hence the allocation of capital between housing and non-housing sectors was not optimal. [932]
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