Working Paper: NBER ID: w2826
Authors: James Berkovec; Don Fullerton
Abstract: In a mean-variance portfolio choice model, each of 3,578 households from the 1983 Survey of Consumer Finances has calculated preferences over housing, other consumption, and risk. Each household is constrained such that any owner-occupied housing in portfolio must match housing services consumed. Corporate taxes are modeled in some detail, and regression coefficients are used to estimate the adjusted gross income, itemizable deductions, and statutory marginal tax rate of each household. General equilibrium simulation results indicate that inflation does not necessarily increase total owner housing. Top-bracket households increase their owner housing, while others switch into bonds. The greater number of households in low-brackets implies that the homeownership rate can fall even if the amount of owner housing rises.
Keywords: Inflation; Housing Consumption; Investment; General Equilibrium
JEL Codes: E31; R21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inflation (E31) | total owner housing (R21) |
| inflation (E31) | homeownership rate (R21) |
| inflation (E31) | net return to housing (R31) |
| inflation (E31) | capital income redistribution (E25) |
| top-bracket households increase owner housing (R21) | lower-bracket households shift to bonds (D14) |