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A Life-Cycle Analysis of Social Security with Housing

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  • Chen, Kaiji

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 with housing as a durable good unfunded social security substantially crowds out housing consumption throughout the life cycle. By contrast, aggregate non-durable consumption is higher when social security is present, although it is postponed until late in life. Moreover, in the presence of housing market frictions, social security lowers the aggregate home ownership rate and reduces the average size of owner-occupied housing. The effects of social security on housing position, furthermore, exhibit substantial heterogeneity across households of different income levels.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15509.

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Date of creation: May 2009
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Handle: RePEc:pra:mprapa:15509

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Keywords: Durable Goods; Housing Market Frictions; Housing Tenure Choice; Social Security;

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References

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  1. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
  2. 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.
  3. 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.
  4. Martin Gervais, 1998. "Housing Taxation and Capital Accumulation," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 9807, University of Western Ontario, Department of Economics.
  5. Martin Feldstein, 1982. "The Optimal Level of Social Security Benefits," NBER Working Papers 0970, National Bureau of Economic Research, Inc.
  6. 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.
  7. 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.
  8. 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).
  9. 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.
  10. Davis, Morris & Heathcote, Jonathan, 2001. "Housing and the Business Cycle," Working Papers, Duke University, Department of Economics 01-09, Duke University, Department of Economics.
  11. Fang Yang, 2009. "Consumption over the Life Cycle: How Different is Housing?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(3), pages 423-443, July.
  12. 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.
  13. 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.
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Cited by:
  1. Yang, Fang, 2013. "Social security reform with impure intergenerational altruism," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 37(1), pages 52-67.
  2. Michael Dotsey & Wenli Li & Fang Yang, 2010. "Consumption and time use over the life cycle," Working Papers 10-37, Federal Reserve Bank of Philadelphia.
  3. Jonathan Halket & Santhanagopalan Vasudev, 2013. "Online Appendix to "Saving Up or Settling Down: Home Ownership over the Life Cycle," Technical Appendices, Review of Economic Dynamics 12-89, Review of Economic Dynamics.
  4. Makoto Nakajima & Irina A. Telyukova, 2011. "Home equity withdrawal in retirement," Working Papers 11-15, Federal Reserve Bank of Philadelphia.
  5. 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.
  6. 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.
  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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