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Estimating regional construction cost differences: Theory and evidence
Author(s) -
Johannes James M.,
Koch Paul D.,
Rasche Robert H.
Publication year - 1985
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090060203
Subject(s) - economics , inflation (cosmology) , function (biology) , econometrics , cost estimate , production (economics) , microeconomics , physics , management , evolutionary biology , theoretical physics , biology
The economic theory of cost functions is employed to derive geographic cost differentials for construction projects located across the United States. Assuming a Cobb‐Douglas production technology, cost function estimates are obtained and used to calculate the regional cost differentials for major US cities relative to Washington, DC. Explanations are provided for adjusting these regional cost differentials according to additional information available on input prices or expected future inflation rates specific to particular locations.