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Do rising tides lift all prices? Income inequality and housing affordability

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  • Matlack, Janna L.
  • Vigdor, Jacob L.

Abstract

Simple partial equilibrium models suggest that income increases at the high end of the distribution can raise prices paid by those at the low end of the income distribution. This prediction does not universally hold in a general equilibrium model, or in models where the rich and poor consume distinct products. We use Census microdata to evaluate these predictions empirically, using data on housing markets in American metropolitan areas between 1970 and 2000. In markets with low-vacancy rates, increases in income at the high end of the distribution are associated with significantly higher rents per room and greater crowding among households headed by a high school dropout. Similar effects are not observed in markets with above-average vacancy rates.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Housing Economics.

Volume (Year): 17 (2008)
Issue (Month): 3 (September)
Pages: 212-224

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Handle: RePEc:eee:jhouse:v:17:y:2008:i:3:p:212-224

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Web page: http://www.elsevier.com/locate/inca/622881

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Keywords: Rent Crowding Low-income;

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References

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  1. Edward L. Glaeser & Joseph Gyourko, 2001. "Urban Decline and Durable Housing," NBER Working Papers 8598, National Bureau of Economic Research, Inc.
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  5. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2006. "Superstar Cities," NBER Working Papers 12355, National Bureau of Economic Research, Inc.
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  8. Quigley, John M. & Raphael, Steven, 2004. "Is Housing Unaffordable? Why Isn't It More Affordable?," Berkeley Program on Housing and Urban Policy, Working Paper Series qt1vp9j3k0, Berkeley Program on Housing and Urban Policy.
  9. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
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  11. Amy S. Bogdon & Ayse Can, 1997. "Indicators of Local Housing Affordability: Comparative and Spatial Approaches," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(1), pages 43-80.
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Cited by:
  1. Sholeh A. Maani & Rhema Vaithianathan & Barbara Wolfe, 2006. "Inequality and Health: Is Housing Crowding the Link?," Working Papers 06_09, Motu Economic and Public Policy Research.
  2. Marianne Bertrand & Adair Morse, 2013. "Trickle-Down Consumption," NBER Working Papers 18883, National Bureau of Economic Research, Inc.
  3. Gregory J. Colman & Dahlia K. Remler, 2008. "Vertical equity consequences of very high cigarette tax increases: If the poor are the ones smoking, how could cigarette tax increases be progressive?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(2), pages 376-400.
  4. Caroline Dewilde, 2011. "GINI DP 18: The interplay between economic inequality trends and housing regime changes in advanced welfare democracies," GINI Discussion Papers 18, AIAS, Amsterdam Institute for Advanced Labour Studies.
  5. Joachim Möller, 2009. "Regional variations in the price of building land: a spatial econometrics approach for West Germany," The Annals of Regional Science, Springer, vol. 43(1), pages 113-132, March.

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