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What are the social benefits of homeownership? Experimental evidence for low-income households

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  • Engelhardt, Gary V.
  • Eriksen, Michael D.
  • Gale, William G.
  • Mills, Gregory B.

Abstract

We estimate the social benefits of homeownership using an exogenous instrument based on randomly assigned treatment status from a field experiment that subsidized saving for home purchase for low-income renters through Individual Development Accounts (IDAs). This approach attempts to eliminate the potential correlation present in previous analyses between unobserved individual characteristics leading to homeownership and traits leading to provision of social capital or local amenities. Consistent with previous work, we show that homeownership positively affects political engagement in simple probits. Instrumental variable probits, however, show no impact of homeownership on political involvement. IV results for other social outcomes are less conclusive. The analysis suggests that with the use of an exogenous instrument, it is possible to generate results that are different from the previous literature. Our results also suggest that being eligible to open an IDA did not spur households to provide more social capital or local amenities.

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Bibliographic Info

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

Volume (Year): 67 (2010)
Issue (Month): 3 (May)
Pages: 249-258

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Handle: RePEc:eee:juecon:v:67:y:2010:i:3:p:249-258

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Web page: http://www.elsevier.com/locate/inca/622905

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Keywords: Homeownership Social benefits;

References

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  1. Bruce Sacerdote, 2000. "Peer Effects with Random Assignment: Results for Dartmouth Roommates," NBER Working Papers 7469, National Bureau of Economic Research, Inc.
  2. Mills, Gregory & Gale, William G. & Patterson, Rhiannon & Engelhardt, Gary V. & Eriksen, Michael D. & Apostolov, Emil, 2008. "Effects of individual development accounts on asset purchases and saving behavior: Evidence from a controlled experiment," Journal of Public Economics, Elsevier, Elsevier, vol. 92(5-6), pages 1509-1530, June.
  3. Green, Richard K. & White, Michelle J., 1997. "Measuring the Benefits of Homeowning: Effects on Children," Journal of Urban Economics, Elsevier, Elsevier, vol. 41(3), pages 441-461, May.
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  11. Hastings, Justine S. & Kane, Thomas J. & Staiger, Douglas O. & Weinstein, Jeffrey M., 2007. "The effect of randomized school admissions on voter participation," Journal of Public Economics, Elsevier, Elsevier, vol. 91(5-6), pages 915-937, June.
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  15. Jakob Roland Munch & Michael Rosholm & Michael Svarer, 2006. "Home Ownership, Job Duration, and Wages," Economics Working Papers, School of Economics and Management, University of Aarhus 2006-06, School of Economics and Management, University of Aarhus.
  16. Chernozhukov, Victor & Hansen, Christian, 2008. "The reduced form: A simple approach to inference with weak instruments," Economics Letters, Elsevier, Elsevier, vol. 100(1), pages 68-71, July.
  17. John Harding & Thomas J. Miceli & C.F. Sirmans, 2000. "Do Owners Take Better Care of Their Housing Than Renters?," Real Estate Economics, American Real Estate and Urban Economics Association, American Real Estate and Urban Economics Association, vol. 28(4), pages 663-681.
  18. Lawrence F. Katz & Jeffrey R. Kling & Jeffrey B. Liebman, 2001. "Moving To Opportunity In Boston: Early Results Of A Randomized Mobility Experiment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(2), pages 607-654, May.
  19. Boehm, Thomas P. & Schlottmann, Alan M., 1999. "Does Home Ownership by Parents Have an Economic Impact on Their Children?," Journal of Housing Economics, Elsevier, Elsevier, vol. 8(3), pages 217-232, September.
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Citations

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Cited by:
  1. W. Scott Frame & Larry D. Wall & Lawrence J. White, 2012. "The Devil's in the Tail: Residential Mortgage Finance and the U.S. Treasury," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 12-12, New York University, Leonard N. Stern School of Business, Department of Economics.
  2. Coulson, N. Edward & Li, Herman, 2013. "Measuring the external benefits of homeownership," Journal of Urban Economics, Elsevier, Elsevier, vol. 77(C), pages 57-67.
  3. Michal Grinstein-Weiss & Michael Sherraden & William G. Gale & William M. Rohe & Mark Schreiner & Clinton Key, 2013. "Long-Term Impacts of Individual Development Accounts on Homeownership among Baseline Renters: Follow-Up Evidence from a Randomized Experiment," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 5(1), pages 122-45, February.
  4. Tuukka Saarimaa & Mika Kortelainen, 2012. "Do Homeowners Benefit the Neighborhood? Evidence from Semiparametric Hedonic Regressions," ERSA conference papers, European Regional Science Association ersa12p472, European Regional Science Association.
  5. Grimes, Arthur & Stillman, Steven & Young, Chris, 2011. "Homeownership, Social Capital and Parental Voice in Schooling," IZA Discussion Papers 6168, Institute for the Study of Labor (IZA).
  6. Zorlu, Aslan & Mulder, Clara H. & van Gaalen, Ruben, 2014. "Ethnic Disparities in the Transition to Home Ownership," IZA Discussion Papers 8039, Institute for the Study of Labor (IZA).
  7. Mika Kortelainen & Tuukka Saarimaa, 2012. "Do homeowners benefit urban neighborhoods? Evidence from housing prices," Working Papers, Government Institute for Economic Research Finland (VATT) 36, Government Institute for Economic Research Finland (VATT).
  8. Jean-Marie Dufour & Joachim Wilde, 2013. "Weak Identification in Probit Models with Endogenous Covariates," Working Papers, Institute of Empirical Economic Research 95, Institute of Empirical Economic Research, revised 28 Feb 2013.
  9. Eriksen, Michael D., 2010. "Homeownership subsidies and the marriage decisions of low-income households," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 40(6), pages 490-497, November.
  10. Ambrose, Brent W. & Diop, Moussa, 2014. "Spillover effects of subprime mortgage originations: The effects of single-family mortgage credit expansion on the multifamily rental market," Journal of Urban Economics, Elsevier, Elsevier, vol. 81(C), pages 114-135.

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