Abstract
The purpose of this paper is to present an alternative way of explaining the surge of land price from 1986 to 1989 instead of using bubbles. We follow Ueda′s theoretical claim that the smaller risk premia in these years caused the surge of land price. We specify an investor′s preference by the extended no-arbitrage condition and derive the risk premium. The shadow price of land is also specified as the marginal rent–price ratio including the time-varying risk premium, and the land demand function is estimated. J. Japan. Int. Econ., September 1993, 7(3), pp. 277–296. Institute of Social and Economic Research, Osaka University, Ibaraki, Osaka 567, Japan.
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