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Housing wealth and aggregate saving

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  • Skinner, Jonathan

Abstract

The recent appreciation in housing value can have large effects on aggregate saving. This paper uses a simulation model to show that aggregate saving will decline substantially if life cycle homeowners spend down their housing windfalls. Homeowners with a bequest motive, however, may save more to assist their children in buying the now more expensive housing. To test whether families spend their housing capital gains, I use housing, income, and consumption data from the Panel Study of Income Dynamics. While a cross-section time-series regression implies that housing wealth does affect saving, a fixed-effects model finds no effect.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 19 (1989)
Issue (Month): 2 (May)
Pages: 305-324

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Handle: RePEc:eee:regeco:v:19:y:1989:i:2:p:305-324

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References

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  1. Calvo, Guillermo A & Kotlikoff, Laurence J & Rodriguez, Carlos Alfredo, 1979. "The Incidence of a Tax on Pure Rent: A New (?) Reason for an Old Answer," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 869-74, August.
  2. Harvey S. Rosen, 1985. "Housing Subsidies: Effects on Housing Decisions, Efficiency, and Equity," NBER Working Papers 1161, National Bureau of Economic Research, Inc.
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  7. Martin Feldstein, 1978. "The Welfare Cost of Capital Income Taxation," NBER Chapters, in: Research in Taxation, pages 29-51 National Bureau of Economic Research, Inc.
  8. Stover, Mark Edward, 1986. "The price elasticity of the supply of single-family detached urban housing," Journal of Urban Economics, Elsevier, vol. 20(3), pages 331-340, November.
  9. Karl E. Case, 1986. "The market for single-family homes in the Boston area," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 38-48.
  10. Eaton, Jonathan, 1988. "Foreign-Owned Land," American Economic Review, American Economic Association, vol. 78(1), pages 76-88, March.
  11. Roger H. Gordon & James R. Hines Jr. & Lawrence H. Summers, 1987. "Notes on the Tax Treatment of Structures," NBER Working Papers 1896, National Bureau of Economic Research, Inc.
  12. Jonathan Eaton, 1987. "A Dynamic Specific-Factors Model of International Trade," NBER Working Papers 1479, National Bureau of Economic Research, Inc.
  13. Feldstein, Martin S, 1977. "The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 349-60, April.
  14. Chamley, Christophe & Wright, Brian D., 1987. "Fiscal incidence in an overlapping generations model with a fixed asset," Journal of Public Economics, Elsevier, vol. 32(1), pages 3-24, February.
  15. Patric H. Hendershott & Joel Slemrod, 1983. "Taxes and the User Cost of Capital for Owner-Occupied Housing," NBER Working Papers 0929, National Bureau of Economic Research, Inc.
  16. Drazen, Allan & Eckstein, Zvi, 1988. "On the Organization of Rural Markets and the Process of Economic Development," American Economic Review, American Economic Association, vol. 78(3), pages 431-43, June.
  17. Bhatia, Kul B, 1987. "Real Estate Assets and Consumer Spending," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 437-44, May.
  18. Henderson, J. Vernon & Ioannides, Yannis M., 1989. "Dynamic aspects of consumer decisions in housing markets," Journal of Urban Economics, Elsevier, vol. 26(2), pages 212-230, September.
  19. Skinner, Jonathan, 1987. "A superior measure of consumption from the panel study of income dynamics," Economics Letters, Elsevier, vol. 23(2), pages 213-216.
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