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The Homeownership Rate among the Elderly and the Life Cycle Hypothesis:European Evidence Using Individual and Household Data

  • Joaquín Alegre Martín

    ()

    (Universitat de les Illes Balears)

  • Llorenç Pou Garcias

    ()

    (Universitat de les Illes Balears)

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    One of the central predictions of the Life Cycle Hypothesis is that individuals run down their wealth during retirement. Although housing wealth is the largest component of total household wealth in most countries, empirical evidence supporting the decumulation hypothesis is mixed. In this paper we examine the housing tenure decision by the aged with microdata at both a household and individual level. The results, based on data from the European Community Household Panel for thirteen European countries, show that for nearly all countries (except for Germany and Denmark), the homeownership rate among the elderly does not decline with age, rejecting the Life Cycle Hypothesis. The results are robust to the (household or individual) level at which the data is analysed. The estimates also show a significant cohort effect for most European countries, so that the later the year of birth, the higher the homeownership rate.

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    File URL: http://www.uib.es/depart/deaweb/deawp/pdf/w49.pdf
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    Paper provided by Universitat de les Illes Balears, Departament d'Economía Aplicada in its series DEA Working Papers with number 49.

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    Date of creation: 2012
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    Handle: RePEc:ubi:deawps:49
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