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House Prices and Retail Prices

Author

Listed:
  • Joe Vavra

    (University of Chicago)

  • Johannes Stroebel

    (New York University)

Abstract

Do increases in wealth driven by house price growth lead to changes in customer shopping and firms' price-setting behavior? We link disaggregated microdata from various sources to construct zip-code level measures of retail prices, house prices, and customer shopping. We find that there is a strong positive relationship between retail prices and house prices. To argue that this relationship is evidence of wealth-effects, we show that increases in house prices increase retail prices only in regions with high owner occupancy rates. House price increases are negative wealth effects for renters, and we find that in regions with low owner occupancy rates, house price growth lowers retail prices. In addition, consumer shopping behavior also changes with house price growth in a way that depends on owner occupancy rates.

Suggested Citation

  • Joe Vavra & Johannes Stroebel, 2014. "House Prices and Retail Prices," 2014 Meeting Papers 72, Society for Economic Dynamics.
    • Handle: RePEc:red:sed014:72
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