IDEAS home Printed from https://ideas.repec.org/p/ucd/wpaper/201807.html
   My bibliography  Save this paper

Bringing the Household Back in. Comparative Capitalism and the Politics of Housing Markets

Author

Listed:
  • Greg Fuller

    (University of Groningen)

  • Alison Johnston

    (Oregon State University)

  • Aidan Regan

    (University College Dublin)

Abstract

Households consume an increasing share of credit in developed economies; however, past and current comparative capitalism research has had very little to say on housing markets. This is an important blind spot. House prices have crucial implications for national economies. Unsustainable housing prices can cause significant macroeconomic instability, drive wealth inequality, and accelerate households’ accumulation of debt. Moreover, housing markets across the developed world fail to conform to traditional comparative political economy “typologies.” While the liberal economies of the UK and Ireland experienced rapid housing price growth between 1995 and 2008, the “egalitarian” Nordic countries were close behind. We argue that the study of comparative capitalism needs to bring the household back in, through an analysis of the largest financial liability they own - mortgages. To understand heterogeneity in housing inflation, it is vital to understand dynamics in two markets that determine homeownership. First, the labor market, which shapes households’ incomes (on which comparative capitalism and comparative political economy more broadly have a lot to say), and; second, the market for mortgages, which shapes households’ access to financial resources (on which comparative capitalism and comparative political economy have very little to say). We argue that the impact of labor market institutions on housing inflation is conditional on national regulatory frameworks that govern mortgage credit access. Using a panel analysis of 17 OECD economies from 1990 to 2007, we find that in permissive mortgage credit regimes, countries with coordinated labour market institutions that restrain income growth have lower housing inflation than countries with uncoordinated wage-setting. This is what the comparative capitalism literature would predict. However, in restrictive mortgage credit regimes (those which undermine households’ capacity to assume mortgage debt), the structure of labour market institutions have no effect on housing inflation.

Suggested Citation

  • Greg Fuller & Alison Johnston & Aidan Regan, 2018. "Bringing the Household Back in. Comparative Capitalism and the Politics of Housing Markets," Working Papers 201807, Geary Institute, University College Dublin.
  • Handle: RePEc:ucd:wpaper:201807
    as

    Download full text from publisher

    File URL: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201807.pdf
    File Function: First version, 2018
    Download Restriction: no

    References listed on IDEAS

    as
    1. Alison Johnston & Aidan Regan, 2017. "Global Finance, Labor Politics, and the Political Economy of Housing Prices," Politics & Society, , vol. 45(3), pages 327-358, September.
    2. Margalit, Yotam, 2013. "Explaining Social Policy Preferences: Evidence from the Great Recession," American Political Science Review, Cambridge University Press, vol. 107(1), pages 80-103, February.
    3. Iversen, Torben & Soskice, David, 2010. "Real Exchange Rates and Competitiveness: The Political Economy of Skill Formation, Wage Compression, and Electoral Systems," American Political Science Review, Cambridge University Press, vol. 104(3), pages 601-623, August.
    4. Soskice, David, 1990. "Wage Determination: The Changing Role of Institutions in Advanced Industrialized Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 6(4), pages 36-61, Winter.
    5. Dorothee Bohle, 2014. "Post-socialist housing meets transnational finance: Foreign banks, mortgage lending, and the privatization of welfare in Hungary and Estonia," Review of International Political Economy, Taylor & Francis Journals, vol. 21(4), pages 913-948, August.
    6. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981, September.
    7. Lucio Baccaro & Jonas Pontusson, 2016. "Rethinking Comparative Political Economy," Politics & Society, , vol. 44(2), pages 175-207, June.
    8. Aizenman, Joshua & Jinjarak, Yothin, 2009. "Current account patterns and national real estate markets," Journal of Urban Economics, Elsevier, vol. 66(2), pages 75-89, September.
    9. Kittel, Bernhard & Winner, Hannes, 2002. "How reliable is pooled analysis in political economy? The globalization welfare state nexus revisited," MPIfG Discussion Paper 02/3, Max Planck Institute for the Study of Societies.
    10. Iversen, Torben, 1998. "Wage Bargaining, Central Bank Independence, and the Real Effects of Money," International Organization, Cambridge University Press, vol. 52(3), pages 469-504, July.
    11. Ansell, Ben, 2014. "The Political Economy of Ownership: Housing Markets and the Welfare State," American Political Science Review, Cambridge University Press, vol. 108(2), pages 383-402, May.
    12. Alison Johnston, 2012. "European Economic and Monetary Union’s perverse effects on sectoral wage inflation: Negative feedback effects from institutional change?," European Union Politics, , vol. 13(3), pages 345-366, September.
    13. Iversen, Torben & Soskice, David, 2001. "An Asset Theory of Social Policy Preferences," American Political Science Review, Cambridge University Press, vol. 95(4), pages 875-893, December.
    14. Odran Bonnet & Pierre-Henri Bono & Guillaume Chapelle & Etienne Wasmer, 2014. "Does housing capital contribute to inequality? A comment on Thomas Piketty’s Capital in the 21st Century," Sciences Po Economics Discussion Papers 2014-07, Sciences Po Departement of Economics.
    15. Hall, Peter A. & Franzese, Robert J., 1998. "Mixed Signals: Central Bank Independence, Coordinated Wage Bargaining, and European Monetary Union," International Organization, Cambridge University Press, vol. 52(3), pages 505-535, July.
    16. Gregory W. Fuller, 2015. "Who’s Borrowing? Credit Encouragement vs. Credit Mitigation in National Financial Systems," Politics & Society, , vol. 43(2), pages 241-268, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucd:wpaper:201807. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Geary Tech). General contact details of provider: http://edirc.repec.org/data/geucdie.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.