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Household-specific housing capital gains and consumption: Evidence from Canadian microdata

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  • Bhatia, Kul
  • Mitchell, Chris

Abstract

This paper analyzes how household consumption decisions respond to accrued capital gains on owner-occupied housing using Canadian microdata. It makes an important methodological contribution by utilizing a hedonic regression approach to estimate household-specific capital gains instead of relying on house-price indices and other proxy measures that have been widely used in earlier literature. The results suggest that household consumption expenditures are increasing in the level of accrued capital gains on housing, and that the sustainability of these gains is important for the magnitude of this relationship. When the level of accrued capital gains is persistent over time, total household consumption increases by approximately 5.4 cents for every dollar of permanent capital gains and non-durable consumption increases by approximately 3.9 cents. Estimates of marginal propensity to consume for households in different age categories and other subgroups are also presented.

Suggested Citation

  • Bhatia, Kul & Mitchell, Chris, 2016. "Household-specific housing capital gains and consumption: Evidence from Canadian microdata," Regional Science and Urban Economics, Elsevier, vol. 56(C), pages 19-33.
    • Handle: RePEc:eee:regeco:v:56:y:2016:i:c:p:19-33
    DOI: 10.1016/j.regsciurbeco.2015.10.004
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    Cited by:

    1. Zekai He & Jingjing Ye & Xiuzhen Shi, 2020. "Housing wealth and household consumption in urban China," Urban Studies, Urban Studies Journal Limited, vol. 57(8), pages 1714-1732, June.
    2. Li, Yu & Liu, Kai & Lu, Xiaoying & Wang, Ben Zhe & Zhou, Xuan, 2022. "Welfare housing and household consumption in urban China," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 326-334.
    3. Hori Masahiro & Niizeki Takeshi, 2019. "Housing Wealth Effects in Japan: Evidence Based on Household Micro Data," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(2), pages 1-28, April.
    4. Pan, Xuefeng & Wu, Weixing, 2021. "Housing returns, precautionary savings and consumption: Micro evidence from China," Journal of Empirical Finance, Elsevier, vol. 60(C), pages 39-55.

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    More about this item

    Keywords

    Housing capital gains; Home prices; Consumption; Wealth effects; Microdata; Canadian;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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