Working Paper: NBER ID: w22882
Authors: Paolo Sodini; Stijn van Nieuwerburgh; Roine Vestman; Ulf von Lilienfeld-Toal
Abstract: Homeownership is widely stimulated by policy yet its economic effects are poorly understood. We exploit quasi-random variation in homeownership generated by privatization decisions of municipally-owned buildings, and use granular data on demographics, income, housing, financial wealth, and debt that allow us to construct high-quality measures of spending. Homeownership causes wealth building via house price appreciation, increases consumption, and improves consumption smoothing across time and states of the world through a collateral effect. It increases mobility for young households, who move up the property ladder, and amplifies wealth accumulation for older households, who take more risk in their financial portfolio.
Keywords: homeownership; wealth accumulation; consumption; mobility; portfolio choice
JEL Codes: D12; D31; E21; G11; H31; J22; R21; R23; R51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| homeownership (R21) | wealth accumulation (E21) |
| homeownership (R21) | consumption (E21) |
| homeownership (R21) | consumption smoothing (D15) |
| homeownership (R21) | mobility among young households (J62) |
| homeownership (R21) | adjustment of financial portfolios (G11) |
| leverage (G24) | wealth accumulation (E21) |