IDEAS home Printed from https://ideas.repec.org/a/taf/apeclt/v26y2019i14p1186-1191.html
   My bibliography  Save this article

Does homeownership promote wealth accumulation?

Author

Listed:
  • Leo Kaas
  • Georgi Kocharkov
  • Edgar Preugschat

Abstract

It is well known that homeowners are richer than renters, even after controlling for observable household characteristics. This is often used as an argument for policies that foster homeownership. However, the causal link between homeownership and wealth is difficult to establish due to many potential sources of endogeneity. Utilizing the Household Finance and Consumption Survey for the Euro area, we correct for endogeneity by using inheriting the household’ s main residence as an instrument. The exclusion restriction is that conditional on the total amount of inheritance, inheriting a home affects the wealth position of the household only through homeownership. For the sample of inheritors we find that the local average treatment effect for households that inherit a home and stay homeowners is negative. Owning a home reduces riches due to sizable reductions in the net holdings of financial and other real wealth of the treated households.

Suggested Citation

  • Leo Kaas & Georgi Kocharkov & Edgar Preugschat, 2019. "Does homeownership promote wealth accumulation?," Applied Economics Letters, Taylor & Francis Journals, vol. 26(14), pages 1186-1191, August.
    • Handle: RePEc:taf:apeclt:v:26:y:2019:i:14:p:1186-1191
    DOI: 10.1080/13504851.2018.1542117
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13504851.2018.1542117
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13504851.2018.1542117?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Boehm, Thomas P. & Schlottmann, Alan M., 2004. "The dynamics of race, income, and homeownership," Journal of Urban Economics, Elsevier, vol. 55(1), pages 113-130, January.
    2. Grossman, Sanford J & Laroque, Guy, 1990. "Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods," Econometrica, Econometric Society, vol. 58(1), pages 25-51, January.
    3. Joao F. Cocco, 2005. "Portfolio Choice in the Presence of Housing," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 535-567.
    4. Hilber, Christian A.L. & Mayer, Christopher, 2009. "Why do households without children support local public schools? Linking house price capitalization to school spending," Journal of Urban Economics, Elsevier, vol. 65(1), pages 74-90, January.
    5. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    6. Mathä, Thomas Y. & Porpiglia, Alessandro & Ziegelmeyer, Michael, 2017. "Household wealth in the euro area: The importance of intergenerational transfers, homeownership and house price dynamics," Journal of Housing Economics, Elsevier, vol. 35(C), pages 1-12.
    7. Leo Kaas & Georgi Kocharkov & Edgar Preugschat, 2019. "Wealth Inequality and Homeownership in Europe," Annals of Economics and Statistics, GENES, issue 136, pages 27-54.
    8. DiPasquale, Denise & Glaeser, Edward L., 1999. "Incentives and Social Capital: Are Homeowners Better Citizens?," Journal of Urban Economics, Elsevier, vol. 45(2), pages 354-384, March.
    9. Gary V. Engelhardt, 1996. "Tax Subsidies and Household Saving: Evidence from Canada," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(4), pages 1237-1268.
    10. Christian A. L. Hilber & Tracy M. Turner, 2014. "The Mortgage Interest Deduction and its Impact on Homeownership Decisions," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 618-637, October.
    11. Marjorie Flavin & Takashi Yamashita, 2002. "Owner-Occupied Housing and the Composition of the Household Portfolio," American Economic Review, American Economic Association, vol. 92(1), pages 345-362, March.
    12. Heaton, John & Lucas, Deborah, 2000. "Portfolio Choice in the Presence of Background Risk," Economic Journal, Royal Economic Society, vol. 110(460), pages 1-26, January.
    13. Dietz, Robert D. & Haurin, Donald R., 2003. "The social and private micro-level consequences of homeownership," Journal of Urban Economics, Elsevier, vol. 54(3), pages 401-450, November.
    14. Raj Chetty & Adam Szeidl, 2007. "Consumption Commitments and Risk Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 831-877.
    15. Green, Richard K. & White, Michelle J., 1997. "Measuring the Benefits of Homeowning: Effects on Children," Journal of Urban Economics, Elsevier, vol. 41(3), pages 441-461, May.
    16. Donald R. Haurin & Toby L. Parcel & R. Jean Haurin, 2002. "Does Homeownership Affect Child Outcomes?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(4), pages 635-666.
    17. Manning, Willard G., 1998. "The logged dependent variable, heteroscedasticity, and the retransformation problem," Journal of Health Economics, Elsevier, vol. 17(3), pages 283-295, June.
    18. Christian A. L. Hilber & Christopher J. Mayer, 2004. "Why Do Households Without Children Support Local Public Schools?," NBER Working Papers 10804, National Bureau of Economic Research, Inc.
    19. Di, Zhu Xiao & Belsky, Eric & Liu, Xiaodong, 2007. "Do homeowners achieve more household wealth in the long run?," Journal of Housing Economics, Elsevier, vol. 16(3-4), pages 274-290, November.
    20. Yamashita, Takashi, 2003. "Owner-occupied housing and investment in stocks: an empirical test," Journal of Urban Economics, Elsevier, vol. 53(2), pages 220-237, March.
    21. Turner, Tracy M. & Luea, Heather, 2009. "Homeownership, wealth accumulation and income status," Journal of Housing Economics, Elsevier, vol. 18(2), pages 104-114, June.
    22. Melvin L. Oliver & Thomas M. Shapiro, 1990. "Wealth of a Nation," American Journal of Economics and Sociology, Wiley Blackwell, vol. 49(2), pages 129-151, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anastasios Evgenidis & Apostolos Fasianos, 2019. "Monetary Policy and Wealth Inequalities in Great Britain: Assessing the role of unconventional policies for a decade of household data," Papers 1912.09702, arXiv.org.
    2. Anastasios Evgenidis & Apostolos Fasianos, 2021. "Unconventional Monetary Policy and Wealth Inequalities in Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(1), pages 115-175, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Centre for Economic Performance, LSE.
    2. Philippe Bracke & Christian Hilber & Olmo Silva, 2014. "Homeownership and Entrepreneurship: The Role of Mortgage Debt and Commitment," CESifo Working Paper Series 5048, CESifo.
    3. Wainer, Allison & Zabel, Jeffrey, 2020. "Homeownership and wealth accumulation for low-income households," Journal of Housing Economics, Elsevier, vol. 47(C).
    4. Raj Chetty & László Sándor & Adam Szeidl, 2017. "The Effect of Housing on Portfolio Choice," Journal of Finance, American Finance Association, vol. 72(3), pages 1171-1212, June.
    5. Gabriel M. Ahlfeldt & Wolfgang Maennig, 2019. "Gewinner und Verlierer von Stadtentwicklung: Ein Plädoyer für mehr Wohneigentum [Winners and losers of urban development: A plea for more home ownership]," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 5(1), pages 111-130, November.
    6. Philippe Bracke & Christian Hilber & Olmo Silva, 2012. "Homeownerhip and Entrepreneurship," SERC Discussion Papers 0103, Centre for Economic Performance, LSE.
    7. Ran Sun Lyng & Jie Zhou, 2019. "Household Portfolio Choice Before and After a House Purchase," Economics Working Papers 2019-01, Department of Economics and Business Economics, Aarhus University.
    8. Christian A. L. Hilber, 2017. "The Economic Implications of House Price Capitalization: A Synthesis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(2), pages 301-339, April.
    9. Ran Sun Lyng & Jie Zhou, 2023. "Household portfolio choice before and after a house purchase," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(6), pages 1376-1398, November.
    10. Fougère, Denis & Poulhès, Mathilde, 2012. "The Effect of Housing on Portfolio Choice: A Reappraisal Using French Data," CEPR Discussion Papers 9213, C.E.P.R. Discussion Papers.
    11. Tokuo Iwaisako & Arito Ono & Amane Saito & Hidenobu Tokuda, 2022. "Disentangling the effect of home ownership on household stockholdings: Evidence from Japanese micro data," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(1), pages 268-295, March.
    12. Zou, Jing & Deng, Xiaojun, 2019. "Financial literacy, housing value and household financial market participation: Evidence from urban China," China Economic Review, Elsevier, vol. 55(C), pages 52-66.
    13. Denis Fougère & Mathilde Poulhes, 2014. "La propriété immobilière: quelle influence sur le portefeuille des ménages ?," Post-Print hal-03393008, HAL.
    14. repec:hal:spmain:info:hdl:2441/2u3vdrl39g94faejrqvdg9duo1 is not listed on IDEAS
    15. Hembre, Erik & Dantas, Raissa, 2022. "Tax incentives and housing decisions: Effects of the Tax Cut and Jobs Act," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    16. Mary A. Silles, 2023. "The effect of education on homeownership: Evidence from 20th century school attendance laws in the United States," Manchester School, University of Manchester, vol. 91(1), pages 1-17, January.
    17. Olsen, Edgar O. & Zabel, Jeffrey E., 2015. "US Housing Policy," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 887-986, Elsevier.
    18. Stotz, Olaf, 2019. "The perception of homeownership utility: Short-term and long-term effects," Journal of Housing Economics, Elsevier, vol. 44(C), pages 99-111.
    19. Denis Fougère & Mathilde Poulhès, 2014. "La propriété immobilière : quelle influence sur le portefeuille financier des ménages ?," Économie et Statistique, Programme National Persée, vol. 472(1), pages 213-231.
    20. Marekwica, Marcel & Schaefer, Alexander & Sebastian, Steffen, 2013. "Life cycle asset allocation in the presence of housing and tax-deferred investing," Journal of Economic Dynamics and Control, Elsevier, vol. 37(6), pages 1110-1125.
    21. Mingzhi Hu & Zhenguo Lin & Yingchun Liu, 2024. "Housing Disparity between Homeowners and Renters: Evidence from China," The Journal of Real Estate Finance and Economics, Springer, vol. 68(1), pages 28-51, January.

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:26:y:2019:i:14:p:1186-1191. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEL20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.