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Disentangling the Housing Satisfaction Puzzle: Does Homeownership Really Matter?

  • Díaz Serrano, Luis
  • Ferrer Carbonell, Ada
  • Hartog, Joop

There is a general consensus that homeownership has beneficial effects for both individuals and society in many outcomes. However, research regarding the effect of homeownership on individuals' subjective well-being remains inconclusive. In this paper, for the first time, we provide empirical evidence for the link between homeownership and housing satisfaction using panel data. We use the eight waves of the European Community Household Panel (ECHP) covering the period 1994-2001. We observe that renters who become homeowners not only experience a significant increase in housing satisfaction, but also after changing their tenure status, they obtain a different utility from the same housing context. This evidence might provide support to the hypothesis that a share of the differences in the perceived utility derived from housing can be attributed to (un)fulfilled expectations or aspirations regarding homeownership. Keywords: Housing satisfaction, subjective well-being, homeownership, fixed-effects, housing aspirations JEL classification: D1, R2.

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File URL: http://hdl.handle.net/2072/42898
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Paper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/42898.

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Date of creation: 2009
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Handle: RePEc:urv:wpaper:2072/42898
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  1. Luis Diaz-Serrano & Alexandrina P. Stoyanova, 2008. "The Causal Relationship between Individual’s Choice Behavior and Self-Reported Satisfaction: the Case of Residential Mobility in the EU," Working Papers XREAP2008-02, Xarxa de Referència en Economia Aplicada (XREAP), revised Mar 2008.
  2. Easterlin, Richard A., 2006. "Life cycle happiness and its sources: Intersections of psychology, economics, and demography," Journal of Economic Psychology, Elsevier, vol. 27(4), pages 463-482, August.
  3. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
  4. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  5. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
  6. Guillaume R. Frechette, 2001. "Random-effects ordered probit," Stata Technical Bulletin, StataCorp LP, vol. 10(59).
  7. Dietz, Robert D. & Haurin, Donald R., 2003. "The social and private micro-level consequences of homeownership," Journal of Urban Economics, Elsevier, vol. 54(3), pages 401-450, November.
  8. van Praag, B. M. S. & Frijters, P. & Ferrer-i-Carbonell, A., 2003. "The anatomy of subjective well-being," Journal of Economic Behavior & Organization, Elsevier, vol. 51(1), pages 29-49, May.
  9. Frijters, Paul, 2000. "Do individuals try to maximize general satisfaction?," Journal of Economic Psychology, Elsevier, vol. 21(3), pages 281-304, June.
  10. Guillaume R. Frechette, 2001. "Update to random-effects ordered probit," Stata Technical Bulletin, StataCorp LP, vol. 10(61).
  11. Butler, J S & Moffitt, Robert, 1982. "A Computationally Efficient Quadrature Procedure for the One-Factor Multinomial Probit Model," Econometrica, Econometric Society, vol. 50(3), pages 761-64, May.
  12. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
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