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Do House Prices Affect Consumption? A Re-assessment of the Wealth Hypothesis

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  • Annalisa Cristini
  • Almudena Sevilla

Abstract

type="main" xml:id="ecca12098-abs-0001" xml:lang="en"> This paper revives the debate in the literature about the relationship between house prices and consumption by exploring conflicting results in the UK. Campbell and Cocco ( ) find that old owners benefit most from a house price increase and young renters least, confirming the so-called wealth hypothesis. In contrast, Attanasio et al. ( ) find that house prices have the same impact on consumption across age groups. We rule out several potential explanations related to data construction, and provide evidence that the functional form can reconcile the conflicting results in the two papers.

Suggested Citation

  • Annalisa Cristini & Almudena Sevilla, 2014. "Do House Prices Affect Consumption? A Re-assessment of the Wealth Hypothesis," Economica, London School of Economics and Political Science, vol. 81(324), pages 601-625, October.
    • Handle: RePEc:bla:econom:v:81:y:2014:i:324:p:601-625
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    1. Hryshko, Dmytro & José Luengo-Prado, María & Sørensen, Bent E., 2010. "House prices and risk sharing," Journal of Monetary Economics, Elsevier, vol. 57(8), pages 975-987, November.
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    1. Hori Masahiro & Niizeki Takeshi, 2019. "Housing Wealth Effects in Japan: Evidence Based on Household Micro Data," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(2), pages 1-28, April.
    2. Gustafsson, Peter & Stockhammar, Pär & Österholm, Pär, 2016. "Macroeconomic effects of a decline in housing prices in Sweden," Journal of Policy Modeling, Elsevier, vol. 38(2), pages 242-255.
    3. Henrik Yde Andersen & Søren Leth-Petersen, 2021. "Housing Wealth or Collateral: How Home Value Shocks Drive Home Equity Extraction and Spending," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 403-440.
    4. Kai Dong & Ching-Ter Chang & Shaonan Wang & Xiaoxi Liu, 2021. "The Dynamic Correlation among Financial Leverage, House Price, and Consumer Expenditure in China," Sustainability, MDPI, vol. 13(5), pages 1-18, March.
    5. Yener Coskun & Burak Sencer Atasoy & Giacomo Morri & Esra Alp, 2018. "Wealth Effects on Household Final Consumption: Stock and Housing Market Channels," IJFS, MDPI, vol. 6(2), pages 1-32, June.
    6. Atalay, Kadir & Edwards, Rebecca, 2022. "House prices, housing wealth and financial well-being," Journal of Urban Economics, Elsevier, vol. 129(C).
    7. Lee, Seungyoon, 2023. "House prices, homeownership, and household consumption: Evidence from household panel data in Korea," Economic Modelling, Elsevier, vol. 126(C).
    8. Signe Rosenberg, 2015. "The Impact of a Change in Real Estate Value on Private Consumption in Estonia," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 7(2).

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    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation

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