Another unnecessary neologism? Maybe. But for summarizing metonymically two or three concepts that are going around (at least in my humble kit knowledge) to characterize one of the problems (not only) of the Argentine real estate market. Dutch disease is characterized mainly by the effect of wealth from one sector (traditionally, raw materials, either due to higher productivity, the discovery of new gas reserves is an extreme example-or higher prices-for example, the Chindia factor in grain) to another sector (relatively less productive or defendant, traditionally tradable industry, producing for export or import substitution) through increased domestic prices in dollars (the type exchange), reflecting the greater wealth of the whole (The country) at the expense of one party (the sector less productive or defendant). This would generate deindustrialisation (primarization, another neologism!), Industrial unemployment (with increased employment in the service sector, and here comes a whole line of discussion on the relative ratings between sectors) and at least in the transition, income redistribution and wealth.
continue the analogy, one might think that the greater relative wealth of a sector increases the price of certain goods, generating a negative spill on the non beneficiaries. This effect would be amplified if the property in question becomes an alternative savings generated speculative demand adding to the natural demand for population growth.
More specifically? The commodities boom that benefits the owner of a field (which, being the highly inelastic supply of land, appropriates most of the increase in terms of exchange) combined with the use of brick as an alternative investment (in a context of moderate inflation, expectations of appreciation, depressed rates, and the impossibility of indexing) may be pushing the property prices in prime locations (chosen by preserving the value and depth to the time of renting or otherwise dispose of the unit), shedding This property inflation to area and property-oriented sectors with labor income, no savings (ie, no assets that can benefit from the wealth effect), go away the possibility of the roof itself.
} More simple? An increase in the price of soybeans could drive the purchase of the house.
Several quick points to not trap the discussion on false dilemmas:
1. The partial effect is described: a serious analysis can not ignore that soy (in general, the external surplus) has contributed to macroeconomic conditions for the increase in formal employment and income.
2. In addition, soy has contributed, through the withholdings, the fiscal surplus allowed to pursue policies that benefited not only income to the poor (who also have access to more complex problems) but also to upper-middle sectors through the grant of service fees (in addition to having contributed to the fiscal surplus generated macroeconomic conditions etc).
3. Dutch disease is added to the negative effect of inflation on the speculative demand for brick and on the initial cost of a mortgage, discussed in previous post.
The regressive effect of a real estate boom is not unknown. The boom in gringo or European capitals seriously hit the purchasing power of the middle classes Despite the (illusory) easier access to mortgage credit.
But our case is different, closer to the traditional Dutch disease, in which improvement in one sector to another sector negatively affected. The closest we got to see me about was the running of the line quality in Washington, DC, or Manhattan, where the improvement in the management of the city attracted wealthy suburbs, forced off-line quality to neighborhoods - and moving out to low-income people could no longer afford the high rents.
Naturally, the assessment of the economic importance of this effect (how much?) not obvious, but requires empirical effort that left some enthusiastic volunteer.
To close, a question that a distinguished colleague left me tweet: Are withholdings, to mitigate the local impact of the commodities boom, mitigate the Dutch disease?
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