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

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Author Info
Matlack, Janna L.
Vigdor, Jacob L.

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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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File URL: http://www.sciencedirect.com/science/article/B6WJR-4T0WJVP-1/2/a405f952b6eb97dbba34e46e68cd516f
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Publisher 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 listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Edward L. Glaeser & Joseph Gyourko, 2005. "Urban Decline and Durable Housing," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 345-375, April.
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  2. Joseph Gyourko & Joseph Tracy, 1999. "A look at real housing prices and incomes: some implications for housing affordability and quality," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 63-77. [Downloadable!]
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  3. Danziger, Sheldon & Gottschalk, Peter, 1986. "Do Rising Tides Lift All Boats? The Impact of Secular and Cyclical Changes on Poverty," American Economic Review, American Economic Association, vol. 76(2), pages 405-10, May. [Downloadable!] (restricted)
  4. Cutler, David M & Glaeser, Edward L, 1997. "Are Ghettos Good or Bad?," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 827-72, August.
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  5. John M. Quigley & Steven Raphael, 2004. "Is Housing Unaffordable? Why Isn't It More Affordable?," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 191-214, Winter. [Downloadable!] (restricted)
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  6. Erzo F.P. Luttmer, 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," NBER Working Papers 10667, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2006. "Superstar Cities," NBER Working Papers 12355, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
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  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. [Downloadable!]
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