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Housing Wealth and Aggregate Saving

  • Jonathan Skinner

The recent appreciation in housing value can have large effects on aggregate saving. This paper uses a simulation model to show that aggregate saving will decline substantially if life cycle homeowners spend down their housing windfalls. Homeowners with a bequest motive, however, may save more to assist their children in buying the now more expensive housing. To test whether families spend their housing capital gains, I use housing, income, and consumption data from the Panel Study of Income Dynamics. While a cross-section time-series regression implies that housing wealth does affect saving, a fixed-effects model finds no effect.

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File URL: http://www.nber.org/papers/w2842.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2842.

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Date of creation: Feb 1989
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Publication status: published as Skinner, Jonathan. "Housing Wealth And Aggregate Saving," Regional Science and Urban Economics, 1989, v19(2), 305-324.
Handle: RePEc:nbr:nberwo:2842
Note: PE
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  18. Eaton, Jonathan, 1987. "A Dynamic Specific-Factors Model of International Trade," Review of Economic Studies, Wiley Blackwell, vol. 54(2), pages 325-38, April.
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