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The Wealth Distribution With Durable Goods

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  • Antonia Díaz
  • María José Luengo-Prado

Abstract

In the United States, the distribution of houses is less egalitarian than that of earnings for the total population, but these two distributions are remarkably similar for homeowners. Additionally, housing as a fraction of total wealth decreases with the level of wealth. In order to understand the different factors that account for these wealth composition patterns, we introduce illiquid houses and collateral credit in a general equilibrium model of heterogeneous agents with idiosyncratic uncertainty. A combination of very persistent shocks to earnings, frictions in the housing market, and a rental market is necessary to obtain numbers in line with the evidence. Copyright (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Antonia Díaz & María José Luengo-Prado, 2010. "The Wealth Distribution With Durable Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 143-170, February.
    • Handle: RePEc:ier:iecrev:v:51:y:2010:i:1:p:143-170
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