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Accounting for Lifecycle Wealth Accumulation: The Role of Housing Institution

  • Sang-Wook Stanley Cho

    ()

    (School of Economics, The University of New South Wales)

This paper constructs a quantitative general equilibrium lifecycle model with uninsurable labor income to account for the differences in the pattern of wealth accumulation across two countries, Korea and the United States. The model incorporates the differences in the housing market institution in the two countries, namely, the mortgage market and the rental market. As a focal point of the model, housing plays multiple roles for households: collateral as well as a source of service flows. The results from the calibrated model can quantitatively explain some empirical findings on the profile of wealth and homeownership in the aggregate as well as over the life cycle. The mortgage market can account for around 60 percent of the differences in the aggregate homeownership ratios in the two countries as well as 23 percent of the differences in the asset portfolio composition. However, the difference in the rental market does not play large role in accounting for the differences in wealth accumulation and homeownership patterns.

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File URL: http://wwwdocs.fce.unsw.edu.au/economics/Research/WorkingPapers/2007_27.pdf
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Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2007-27.

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Length: 45 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:swe:wpaper:2007-27
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  7. Martin Gervais, 1998. "Housing Taxation and Capital Accumulation," UWO Department of Economics Working Papers 9807, University of Western Ontario, Department of Economics.
  8. Edward L. Glaeser & Jesse M. Shapiro, 2002. "The Benefits of the Home Mortgage Interest Deduction," NBER Working Papers 9284, National Bureau of Economic Research, Inc.
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  10. William Goetzmann & Matthew Spiegel, 2000. "The Policy Implications of Portfolio Choice in Underserved Mortgage Markets," Yale School of Management Working Papers ysm161, Yale School of Management, revised 01 Mar 2001.
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  19. Pedro Silos, 2005. "Housing tenure and wealth distribution in life-cycle economies," Working Paper 2005-25, Federal Reserve Bank of Atlanta.
  20. Sanford J. Grossman & Guy Laroque, 1987. "Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods," NBER Working Papers 2369, National Bureau of Economic Research, Inc.
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  25. Chris Carroll & Wendy Dunn, 1997. "Unemployment Expectations, Jumping (S,s) Triggers, and Household Balance Sheets," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 165-230 National Bureau of Economic Research, Inc.
  26. Edward L. Glaeser & Jessse M. Shapiro, 2002. "The Benefits of the Home Mortgage Interest Deduction," Harvard Institute of Economic Research Working Papers 1979, Harvard - Institute of Economic Research.
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