Working Paper: NBER ID: w22232
Authors: Greg Kaplan; Kurt Mitman; Giovanni L. Violante
Abstract: In an influential paper, Mian, Rao, and Sufi (2013) exploit geographic variation to measure the effect of the fall in housing net worth on household expenditures during the Great Recession. Their widely-cited estimates are based on proprietary house price and proprietary expenditure data and therefore not easily replicable. We use alternative data on a subset of non-durable goods and on house prices, which are more easily accessible, to replicate their study. When estimating their same specification on our data, we obtain values for the elasticity of expenditures to the housing net worth shock that are virtually indistinguishable from theirs. However, our robustness analyses with respect to alternative model specifications yield more nuanced conclusions about the separate roles of house prices and initial housing exposure/leverage for the drop in expenditures. Moreover, the estimated elasticity is consistent, theoretically and quantitatively, with a simple calibrated model with wealth effects where leverage and credit constraints play no role.
Keywords: Nondurable Consumption; Housing Net Worth; Great Recession
JEL Codes: E21; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Housing wealth effect (R21) | Nondurable consumption expenditures (D12) |
| Decline in housing net worth (G51) | Decrease in household consumption expenditures (D12) |
| Housing net worth shocks (G59) | Nondurable consumption expenditures (D12) |
| Initial housing exposure and leverage (G51) | Nondurable expenditures (D12) |