Political Ideology and Durable Spending

Research in psychology suggests that conservatives should focus more on the investment value of durables, whereas liberals on consumption value. We test this hypothesis by examining the differential housing transaction motives of conservative and liberal households. Similar to other durable goods, housing assets embody both consumption and investment values and represent the largest assets of U.S. households. We show that conservative households transact more frequently than observationally similar liberal households, especially in secondary properties. Conditional on transacting, conservatives more often trade down and realize capital gains, while liberals trade up and increase housing consumption. Crucially, conservatives’ transactions are more sensitive to financial incentives affecting housing’s investment value: changes in interest rates, the opportunity cost of housing, and positive wealth effects. Within households, ideology does not combine linearly: mixed-ideology couples transact less than politically homogeneous ones, and their choices align more with the man’s ideology.