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Social security and elderly homeownership

  • Engelhardt, Gary V.
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    Over the last twenty-five years, the homeownership rate of households 65 years and older has risen steadily, while the homeownership rate for 35-64 year old households has remained relatively unchanged. At the same time, the real value of Social Security benefits has risen substantially. Using data from the March 1978 to 2001 Current Population Surveys, this paper documents the evolution and assesses the causal role of the Social Security program in increasing elderly homeownership. To isolate the causal effect, the analysis develops an instrumental-variable approach that relies on the large variation in benefits for birth cohorts from 1900 to 1930 due to double indexation of the system and the so-called Social Security "notch." For all elderly, the estimated elasticity of homeownership to Social Security benefits ranges from 0.26 to 0.49. Across marital groups, the widowed have the greatest responsiveness to benefits. Increases in benefits also increase household formation among the elderly. Overall, the estimates indicate that between half and as much as all of the time-series rise in elderly homeownership over the last twenty-five years can be attributable to the rise in Social Security benefits and suggest that reductions in benefits would alter homeownership among the elderly significantly.

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    File URL: http://www.sciencedirect.com/science/article/B6WMG-4N9P4HG-1/2/05063166fddd397f92bc20545e094b53
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    Article provided by Elsevier in its journal Journal of Urban Economics.

    Volume (Year): 63 (2008)
    Issue (Month): 1 (January)
    Pages: 280-305

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    Handle: RePEc:eee:juecon:v:63:y:2008:i:1:p:280-305
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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    1. Megbolugbe, Isaac & Sa-Aadu, J. & Shilling, James D., 1999. "Elderly Female-Headed Households and the Decision to Trade Down," Journal of Housing Economics, Elsevier, vol. 8(4), pages 285-300, December.
    2. Richard K. Green, 1995. "Should the Stagnant Homeownership Rate be a Source of Concern?," Wisconsin-Madison CULER working papers 95-06, University of Wisconsin Center for Urban Land Economic Research.
    3. Gary V. Engelhardt & Jonathan Gruber & Cynthia D. Perry, 2005. "Social Security and Elderly Living Arrangements: Evidence from the Social Security Notch," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
    4. Green, Richard K. & Vandell, Kerry D., 1999. "Giving households credit: How changes in the U.S. tax code could promote homeownership," Regional Science and Urban Economics, Elsevier, vol. 29(4), pages 419-444, July.
    5. Jonathan Feinstein & Daniel McFadden, 1987. "The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects," NBER Working Papers 2471, National Bureau of Economic Research, Inc.
    6. John R. Moran & Kosali Ilayperuma Simon, 2004. "Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts," Center for Policy Research Working Papers 66, Center for Policy Research, Maxwell School, Syracuse University.
    7. Bound, John & Brown, Charles & Mathiowetz, Nancy, 2001. "Measurement error in survey data," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 59, pages 3705-3843 Elsevier.
    8. Alan B. Krueger & Jorn-Steffen Pischke, 1991. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," NBER Working Papers 3699, National Bureau of Economic Research, Inc.
    9. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
    10. Steven F. Venti & David A. Wise, 1989. "Aging, Moving, and Housing Wealth," NBER Chapters, in: The Economics of Aging, pages 9-54 National Bureau of Economic Research, Inc.
    11. Steven F. Venti & David A. Wise, 1989. "But They Don't Want to Reduce Housing Equity," NBER Working Papers 2859, National Bureau of Economic Research, Inc.
    12. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
    13. John R. Moran & JKosali Ilayperuma Simon, 2006. "Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
    14. 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.
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