Housing Wealth and Consumption: Evidence from Geographically Linked Microdata†

Housing Wealth and Consumption: Evidence from Geographically Linked Microdata† AbstractRising home values also raise the cost of living, offsetting their impact on consumption. However, additional home equity collateral can loosen borrowing constraints, increasing spending for households that value their current endowment of housing highly. I use geographically linked microdata to exploit regional heterogeneity in housing markets and identify the causal effect of house price fluctuations on consumer spending. A $1 increase in home values leads to a $0.047 increase in spending for homeowners, but a negligible response for renters. Results reflect large responses among credit constrained households, suggesting looser borrowing constraints are a primary driver of the MPC out of housing wealth. (JEL D12, D14, E21, R31) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

Housing Wealth and Consumption: Evidence from Geographically Linked Microdata†

Preview Only
32 pages

Loading next page...
 
/lp/aea/housing-wealth-and-consumption-evidence-from-geographically-linked-1PHAXxk8yO
Publisher
American Economic Association
Copyright
Copyright © 2017 © American Economic Association
ISSN
0002-8282
D.O.I.
10.1257/aer.20150491
Publisher site
See Article on Publisher Site

Abstract

AbstractRising home values also raise the cost of living, offsetting their impact on consumption. However, additional home equity collateral can loosen borrowing constraints, increasing spending for households that value their current endowment of housing highly. I use geographically linked microdata to exploit regional heterogeneity in housing markets and identify the causal effect of house price fluctuations on consumer spending. A $1 increase in home values leads to a $0.047 increase in spending for homeowners, but a negligible response for renters. Results reflect large responses among credit constrained households, suggesting looser borrowing constraints are a primary driver of the MPC out of housing wealth. (JEL D12, D14, E21, R31)

Journal

American Economic ReviewAmerican Economic Association

Published: Nov 1, 2017

There are no references for this article.

Sorry, we don’t have permission to share this article on DeepDyve,
but here are related articles that you can start reading right now:

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off