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Does Homeownership Promote Wealth Accumulation?

Author

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  • Leo Kaas

    (Department of Economics, University of Konstanz, Germany)

  • Georgi Kocharkov

    (Department of Economics, University of Konstanz, Germany)

  • Edgar Preugschat

    (Technical University Dortmund, Germany)

Abstract

It is well known that homeowners are richer than renters, even after controlling for observable 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, 2016. "Does Homeownership Promote Wealth Accumulation?," Working Paper Series of the Department of Economics, University of Konstanz 2016-03, Department of Economics, University of Konstanz.
    • Handle: RePEc:knz:dpteco:1603
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.

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    More about this item

    Keywords

    Homeownership; Wealth accumulation; Inheritance; Instrumental variables;
    All these keywords.

    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

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