Working Paper: CEPR ID: DP14935
Authors: Ulrike M. Malmendier; Alex Steiny Wellsjo
Abstract: What explains the vast differences in homeownership rates across and within countries? We argue that individual lifetime exposure to inflation play a significant role in the decision to become homeowner. First, we show that immigrants' country-of-origin inflation experiences predict their homeownership rates in the US. Second, using household data from 20 European countries, we estimate that a one log-point increase in personally experienced inflation predicts a 19pp increase in the average individual's likelihood of homeownership. The relationship between homeownership and experienced inflation is robust to other determinants of homeownership as well as any differences across countries and over time.
Keywords: homeownership; inflation; lifetime experiences
JEL Codes: R31; E03; G02; D03; D14; D83; D84; E21; G11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| access to fixed-rate mortgages (G21) | effect of experienced inflation on homeownership (R21) |
| lifetime exposure to inflation (E31) | homeownership decisions (R21) |
| immigrants' inflation experiences in country of origin (F22) | homeownership rates in U.S. (R21) |
| experienced inflation (E31) | homeownership decisions (R21) |
| personally experienced inflation (E31) | likelihood of homeownership (R21) |
| one log-point increase in experienced inflation (E31) | predicted homeownership rates (R21) |