Working Paper: CEPR ID: DP17127
Authors: Virginia Sanchez-Marcos; Hamish Low
Abstract: Fluctuations in house price generate substantial heterogeneity in the price of purchase of similar dwellings depending on the time of purchase. These differences in the price of purchase have large effects on life-time consumption and on income-net-of- housing-costs. We document these effects using the large house price fluctuations during the recent housing boom-bust in Spain. Households can mitigate these impacts through changing labor supply which we estimate using an IV strategy. Men work more in response to higher house prices, whereas the correlation of house prices and labor supply for women is driven by selection: households where women work more, buy more expensive houses.
Keywords: house price fluctuations; labor supply; mortgage costs
JEL Codes: D31; E32; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| house prices at the time of purchase (R31) | labor supply (J20) |
| purchasing a house at peak prices (R31) | gross income (D31) |
| purchasing a house at peak prices (R31) | adjusted income (E25) |
| men purchasing homes at higher prices (R21) | employment (J68) |
| housing costs (R21) | disposable income (D10) |
| house prices (R31) | income inequality (D31) |