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A Life-Cycle Analysis of Social Security with Housing

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  • Kaiji Chen

    (University of Oslo)

Abstract

This paper incorporates two features of housing in a life-cycle analysis of social security: housing as a durable good and housing market frictions. We find that both housing quantities and homeownership rates respond strongly to eliminating social security. Accordingly, the aggregate impacts of this policy reform are significantly larger in an economy with explicit housing choices than in a standard life-cycle economy. Our analysis shows that the key mechanism behind these results is the substitution effects of a change in interest rates and, thus, the price of housing services on the choice of non-durable consumption versus housing services. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2009.10.001
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 13 (2010)
Issue (Month): 3 (July)
Pages: 597-615

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Handle: RePEc:red:issued:08-199

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Related research

Keywords: Durable goods; Housing market frictions; Housing tenure choice; Social security;

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References

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  1. Morris A. Davis & Jonathan Heathcote, 2005. "Housing And The Business Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 751-784, 08.
  2. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2007. " Winners and Losers in Housing Markets," CDMA Conference Paper Series, Centre for Dynamic Macroeconomic Analysis 0705, Centre for Dynamic Macroeconomic Analysis.
  3. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2011. "Winners and Losers in Housing Markets," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 43, pages 255-296, 03.
  4. Feldstein, Martin S, 1985. "The Optimal Level of Social Security Benefits," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(2), pages 303-20, May.
  5. Gervais, Martin, 2002. "Housing taxation and capital accumulation," Journal of Monetary Economics, Elsevier, Elsevier, vol. 49(7), pages 1461-1489, October.
  6. Inder J Ruprah & Luis T Marcano, 2007. "A Meta-Impact Evaluation of Social Housing Programs: The Chilean Case," OVE Working Papers, Inter-American Development Bank, Office of Evaluation and Oversight (OVE) 0207, Inter-American Development Bank, Office of Evaluation and Oversight (OVE).
  7. Marjorie Flavin & Takashi Yamashita, 2002. "Owner-Occupied Housing and the Composition of the Household Portfolio," American Economic Review, American Economic Association, American Economic Association, vol. 92(1), pages 345-362, March.
  8. Rui Yao, 2005. "Optimal Consumption and Portfolio Choices with Risky Housing and Borrowing Constraints," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 18(1), pages 197-239.
  9. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
  10. Santiago Budria Rodriguez & Javier Diaz-Gimenez & Vincenzo Quadrini & Jose-Victor Rior-Rull, 2002. "Updated facts on the U.S. distributions of earnings, income, and wealth," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-35.
  11. Fang Yang, 2009. "Consumption over the Life Cycle: How Different is Housing?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(3), pages 423-443, July.
  12. Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2003. "A welfare analysis of social security in a dynastic framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1247-1274, November.
  13. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2010. "Winners and Losers in House Markets," Working Papers, Central Bank of Cyprus 2010-5, Central Bank of Cyprus.
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Citations

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Cited by:
  1. Yanbin Chen & Fangxing Li & Zhesheng Qiu, 2013. "Housing and Saving with Finance Imperfection," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 207-248, May.
  2. Jonathan Halket & Santhanagopalan Vasudev, 2014. "Saving Up or Settling Down: Home Ownership over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 345-366, April.
  3. Michael Dotsey & Wenli Li & Fang Yang, 2010. "Consumption and time use over the life cycle," Working Papers 10-37, Federal Reserve Bank of Philadelphia.
  4. Jonathan Halket & Santhanagopalan Vasudev, 2012. "Home Ownership, Savings, and Mobility Over The Life Cycle," Economics Discussion Papers, University of Essex, Department of Economics 712, University of Essex, Department of Economics.
  5. Yang, Fang, 2013. "Social security reform with impure intergenerational altruism," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 37(1), pages 52-67.
  6. Makoto Nakajima & Irina A. Telyukova, 2011. "Home equity withdrawal in retirement," Working Papers 11-15, Federal Reserve Bank of Philadelphia.
  7. Fang Yang & Michael Dotsey & Wenli Li, . "Home Production and Social Security Reform," Departmental Working Papers, Department of Economics, Louisiana State University 2014-02, Department of Economics, Louisiana State University.

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