Research On The Substitution Between Capital And Land

As an important determinant of land rent gradient, the population density gradient, the factor share of land and housing capital, the elasticity of substitution between capital and land is a key parameter in the explanation of spatial structure of urban building. Study on the elasticity of substitution between capital and land may not only make contribution to property enterprise to determine housing marketing price, but also may for the government, to formulate the urban housing development plan, observe the rules of capital and land inputs in the housing development, as well as a reference to the government to establish rational and effective policy.This paper profits from the domestic and foreigner research results, based on the economical theory of substitution, studies the urban housing elasticity of substitution of Hangzhou.First, this paper analyzes capital and land substitution relationship theoretically; second, constructing constant elasticity of substitution Model (CES) and variable elasticity of substitution Model (VES) based on the traditional production functions; third, gathering urban housing transaction sales data of Hangzhou from November 2007 to January 2008 and selected 36 residence communities as the subject investigated, after essential modification, applying substitution Model to estimate the elasticity of substitution for each residence community; finally, using MapInfo software, carrying on the elasticity of housing substitution spatial variation research.The results show that elasticity of substitution is different when we use constant elasticity of substitution Model (CES) and variable elasticity of substitution Model (VES) repectively, constant elasticity is between 0.829 and 0.375, while variable elasticity is between 0.82 and 0.39, but they both have indicated that higher substitution elasticity of residence community is located in the more central area consistently, and decrease progressively to all around from the center.In addition, it also indicated that some substitution elasticity of neighboring residence community have big discrepancy, affected by natural environment, housing itself property management and other factors.