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Non-durable Consumption and Housing Net Worth in the Great Recession: Evidence from Easily Accessible Data

Author

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  • Greg Kaplan
  • Kurt Mitman
  • Giovanni L. Violante

Abstract

In an influential paper, Mian, Rao, and Sufi (2013) exploit geographic variation to measure the effect of the fall in housing net worth on household expenditures during the Great Recession. Their widely-cited estimates are based on proprietary house price and proprietary expenditure data and therefore not easily replicable. We use alternative data on a subset of non-durable goods and on house prices, which are more easily accessible, to replicate their study. When estimating their same specification on our data, we obtain values for the elasticity of expenditures to the housing net worth shock that are virtually indistinguishable from theirs. However, our robustness analyses with respect to alternative model specifications yield more nuanced conclusions about the separate roles of house prices and initial housing exposure/leverage for the drop in expenditures. Moreover, the estimated elasticity is consistent, theoretically and quantitatively, with a simple calibrated model with wealth effects where leverage and credit constraints play no role.

Suggested Citation

  • Greg Kaplan & Kurt Mitman & Giovanni L. Violante, 2016. "Non-durable Consumption and Housing Net Worth in the Great Recession: Evidence from Easily Accessible Data," NBER Working Papers 22232, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22232
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    References listed on IDEAS

    as
    1. Scott R. Baker, 2018. "Debt and the Response to Household Income Shocks: Validation and Application of Linked Financial Account Data," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1504-1557.
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    4. Johannes Stroebel & Joseph Vavra, 2019. "House Prices, Local Demand, and Retail Prices," Journal of Political Economy, University of Chicago Press, vol. 127(3), pages 1391-1436.
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    6. Aaron Hedlund, 2014. "The Cyclical Dynamics of Illiquid Housing, Debt, and Foreclosures," Working Papers 1416, Department of Economics, University of Missouri.
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    8. Hamermesh, Daniel S., 2007. "Replication in Economics," IZA Discussion Papers 2760, Institute of Labor Economics (IZA).
    9. Mian, A. & Sufi, A., 2016. "Who Bears the Cost of Recessions? The Role of House Prices and Household Debt," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 255-296, Elsevier.
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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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