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A Life-Cycle Analysis of Social Security with Housing

Author

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  • Kaiji Chen

    (University of Oslo)

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 both housing quantities and homeownership rates respond strongly to eliminating social security. Accordingly, the aggregate impacts of this policy reform are significantly larger in an economy with explicit housing choices than in a standard life-cycle economy. Our analysis shows that the key mechanism behind these results is the substitution effects of a change in interest rates and, thus, the price of housing services on the choice of non-durable consumption versus housing services. (Copyright: Elsevier)

Suggested Citation

  • Kaiji Chen, 2010. "A Life-Cycle Analysis of Social Security with Housing," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 597-615, July.
  • Handle: RePEc:red:issued:08-199 DOI: 10.1016/j.red.2009.10.001
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    References listed on IDEAS

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    1. Gervais, Martin, 2002. "Housing taxation and capital accumulation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1461-1489, October.
    2. Morris A. Davis, 2010. "housing and the business cycle," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
    3. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2011. "Winners and Losers in Housing Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 255-296, March.
    4. 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.
    5. Martin Feldstein, 1985. "The Optimal Level of Social Security Benefits," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 303-320.
    6. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2010. "Winners and Losers in House Markets," Working Papers 2010-5, Central Bank of Cyprus.
    7. Santiago Budria Rodriguez & Javier Diaz-Gimenez & Vincenzo Quadrini & Jose-Victor Rios-Rull, 2002. "Updated facts on the U.S. distributions of earnings, income, and wealth," Quarterly Review, Federal Reserve Bank of Minneapolis, pages 2-35.
    8. Marjorie Flavin & Takashi Yamashita, 2002. "Owner-Occupied Housing and the Composition of the Household Portfolio," American Economic Review, American Economic Association, pages 345-362.
    9. 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.
    10. Inder J Ruprah & Luis T Marcano, 2007. "A Meta-Impact Evaluation of Social Housing Programs: The Chilean Case," OVE Working Papers 0207, Inter-American Development Bank, Office of Evaluation and Oversight (OVE).
    11. Rui Yao, 2005. "Optimal Consumption and Portfolio Choices with Risky Housing and Borrowing Constraints," Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 197-239.
    12. 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, vol. 44(4), pages 1247-1274, November.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jonathan Halket & Lars Nesheim & Florian Oswald, 2015. "The housing stock, housing prices, and user costs: The roles of location, structure and unobserved quality," Sciences Po publications cwp73/15, Sciences Po.
    2. Yanbin Chen & Fangxing Li & Zhesheng Qiu, 2013. "Housing and Saving with Finance Imperfection," Annals of Economics and Finance, Society for AEF, pages 207-248.
    3. Michael Dotsey & Wenli Li & Fang Yang, 2014. "Consumption And Time Use Over The Life Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 665-692, August.
    4. Dotsey, Michael & Li, Wenli & Yang, Fang, 2015. "Home production and Social Security reform," European Economic Review, Elsevier, vol. 73(C), pages 131-150.
    5. Koka Katerina, 2014. "Inflation effects on capital accumulation in a model with residential and non-residential assets," The B.E. Journal of Macroeconomics, De Gruyter, pages 1-28.
    6. repec:esx:essedp:712 is not listed on IDEAS
    7. Halket, Jonathan R & Vasudev, Santhanagopalan, 2012. "Home Ownership, Savings, and Mobility Over The Life Cycle," Economics Discussion Papers 2876, University of Essex, Department of Economics.
    8. repec:eee:chieco:v:46:y:2017:i:c:p:290-305 is not listed on IDEAS
    9. Irina Telyukova & Makoto Nakajima, 2010. "Home Equity Withdrawal in Retirement," 2010 Meeting Papers 636, Society for Economic Dynamics.
    10. Katerina Koka, 2015. "The Impact of the Population Age Structure on the Response to Negative Asset Shocks," Economics Bulletin, AccessEcon, vol. 35(4), pages 2270-2281.
    11. Yang, Fang, 2013. "Social security reform with impure intergenerational altruism," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 52-67.
    12. Jonathan Halket & Santhanagopalan Vasudev, 2014. "Saving Up or Settling Down: Home Ownership over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 345-366, April.
    13. Michal Rubaszek, 2017. "Reforming housing rental market in a life-cycle model," Working Papers 2017-028, Warsaw School of Economics, Collegium of Economic Analysis.
    14. Anson T. Y. Ho & Jie Zhou, 2016. "Housing and Tax-Deferred Retirement Accounts," Staff Working Papers 16-24, Bank of Canada.
    15. David Love & Lucie Schmidt, 2015. "Comprehensive Wealth of Immigrants and Natives," Working Papers wp328, University of Michigan, Michigan Retirement Research Center.
    16. Jonathan Halket & Lars Nesheim & Florian Oswald, 2015. "The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality," CeMMAP working papers CWP73/15, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    17. repec:eee:eecrev:v:97:y:2017:i:c:p:26-41 is not listed on IDEAS

    More about this item

    Keywords

    Durable goods; Housing market frictions; Housing tenure choice; Social security;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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