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Housing internal migration and economic growth in Sweden

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Construction of new housing has been low in Sweden for two decades. Meanwhile, the rate of population growth has increased since the start of the new millennium, particularly in metropolitan areas. There is an overall concern that the “ever increasing housing shortage” will reduce mobility and, consequently, lower economic growth. Using annual municipal-level data from between 1993 and 2012, we estimate two equations. In the first equation, we model intermunicipal migration as a function of characteristics (including housing) at the origin and destination. In the second equation, we model the growth of long-run municipal income per capita as a function of (internal) in-migration and out-migration. In-sample simulations suggest that changes in housing per capita since 1992 have reduced annual in-migration to the three metropolitan areas by 3.8–5.2 percent, on average, between 1993 and 2012. Correspondingly, out-migration from remaining municipalities with fewer than 25,000 residents has been reduced by about 7.2 percent per year. We estimate that national earned per-capita incomes would have been 0.3 percent higher in 2012, had housing per capita remained at the level of 1992. That this did not occur is entirely due to reduced inmigration to the metropolitan regions and the large university towns.

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