Housing Wealth and Consumption: Evidence from Geographically Linked Microdata

Aladangady, Aditya

doi:10.1257/aer.20150491

Cited by 228 publications

(176 citation statements)

References 35 publications

Supporting

Mentioning

153

Contrasting

Order By: Relevance

“…That is, it is akin to a destruction of housing wealth stemming from a shift in preferences or beliefs rather than a destruction stemming from shifts in labor income or in credit market conditions. We confirm recent research (Mian et al (2013); Aladangady (2017)) that balance sheet conditions, in particular a household's combined loan-to-value (CLTV) ratio, is critical for a household's response. We find that homeowners finance new car purchases almost entirely by taking on additional debt and consistent with this, the entire elasticity is concentrated to homeowners with a CLTV ratio between 0.6 and 0.8.…”

Section: Introductionsupporting

confidence: 89%

The Housing Wealth Effect: Quasi-Experimental Evidence

2019

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. AbstractWe exploit a quasi-experiment to provide new evidence on the magnitude of the housing wealth effect. We estimate an immediate shock of approximately −15% to house prices close to one of Stockholm's airports after its operations were unexpectedly continued as a result of political bargaining. This source of price variation is ideal to identify housing wealth effects since it is local and unrelated to variation in macroeconomic conditions. Using a household data set with granular geographic information on location of primary residence, we find an elasticity of 0.45 among purchasers of new cars. Converting our estimate to an aggregate MPC on cars, it is however only 0.13 cents per dollar. The MPC is entirely concentrated to homeowners with a combined loan-to-value ratio between 0.6 and 0.8 which, on the one hand, confirms the key role of household balance sheets but on the other hand refutes a monotone relationship between response and household leverage.JEL classification: D12, E21, E32, E44, E60.

show abstract

Section: Introductionsupporting

confidence: 89%

The Housing Wealth Effect: Quasi-Experimental Evidence

2019

View full text Add to dashboard Cite

show abstract

“…For instance, Aladangady (2017) examines the relationship between housing wealth and consumption over the period 1986-2008, using the Consumer Expenditure Survey (CES). Excepting the data set we will use in this study, we know of no data that satisfy these requirements.…”

mentioning

confidence: 99%

“…Excepting the data set we will use in this study, we know of no data that satisfy these requirements. For instance, Aladangady (2017) examines the relationship between housing wealth and consumption over the period 1986-2008, using the Consumer Expenditure Survey (CES). However, in the absence of self-reported home values in the CES before 2007, the author constructs a measure of changes in housing wealth by applying the growth rate of the county-level house price index to the median home value in the county where an individual resides.…”

mentioning

confidence: 99%

The Effect of Housing Wealth Losses on Spending in the Great Recession

2018

View full text Add to dashboard Cite

We use panel data on a complete inventory of household spending and assets to estimate the spending response to the sharp and largely unexpected declines in house values that occurred in the Great Recession. Our study complements the existing literature on this topic by relying exclusively on longitudinal micro data on both household wealth and expenditure. Our data span the period 2002-2012, allowing us to separate trends in spending from innovations in response to unexpected wealth changes. We find the marginal propensity to consume out of an unexpected housing wealth change to be 6 cents per dollar among older American households. (JEL D12, D14, E21)The quantitative relationship between an unexpected wealth loss or gain (a wealth shock) and consumption can sharpen our understanding of intertemporal decisions. In the absence of constraints, it reveals the choice between present and future consumption and shows how consumption is traded off against other uses of wealth such as leisure. In the presence of constraints, it shows the realized ability to smooth consumption. Further, from a macro perspective, the average response of households to wealth shocks has the potential to exacerbate booms or busts in the economy. Windfall gains in the housing or stock market may lead to spending increases, possibly contributing to bubbles in those markets. Unanticipated wealth losses may cause spending reductions, adding to the deflationary forces that were responsible for the losses. Consequently, policy makers have considerable interest in the consumption response to a wealth shock.In this article, we use household-level data on wealth changes and spending from before, during, and after the Great Recession to estimate the response of household spending to wealth shocks.

show abstract

“…The economic significance of my findings is supported by the fact that the overwhelming majority of households are homeowners and only a small fraction of them moves at a time. 2 My findings also relate to a large literature that documents an empirical relationship between house-price changes and the households' consumption expenditure (see Aladangady, 2017;Browning et al, 2013;Campbell and Cocco, 2007;Carroll et al, 2011;Case et al, 2005;Cooper, 2013;Gan, 2010;Mian et al, 2013;Mian and Sufi, 2014;Paiella and Pistaferri, 2017). An important channel for the relationship between house-price changes and consumption considered in the above studies is the housing wealth effect, which suggests house-price appreciation may result in the perception of larger housing wealth and may lead to the increase of consumption expenditure by relaxing households' lifetime resource constraints.…”

Section: Introductionmentioning

confidence: 52%

Intratemporal Substitution between Housing and Nondurable Consumption: Evidence from Reinvestment in Housing Stock

Khorunzhina

2018

SSRN Journal

View full text Add to dashboard Cite

I investigate empirically the intratemporal dependence between nondurable consumption and housing. Using the data on maintenance expenditures and self-assessed house value, I separate the measure of housing stock and house prices, and use these data for estimation of the model, which allows for testing whether consumption and housing are characterized by intratemporal nonseparability in the contemporaneous utility. I find evidence in favor of a substitution mechanism between housing and total nondurable consumption. A similar conclusion is reached for some separate consumption categories, such as food, transport, clothing, vacations, and entertainment. JEL C51, D12, D13, E21, R21

show abstract

Housing Wealth and Consumption: Evidence from Geographically Linked Microdata

Cited by 228 publications

References 35 publications

The Housing Wealth Effect: Quasi-Experimental Evidence

The Housing Wealth Effect: Quasi-Experimental Evidence

The Effect of Housing Wealth Losses on Spending in the Great Recession

Intratemporal Substitution between Housing and Nondurable Consumption: Evidence from Reinvestment in Housing Stock

Contact Info

Product

Resources

About