Arbeitspapier

Homeownership. Low household mobility, volatile housing prices, high income dispersion

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We develop a dynamic stochastic equilibrium model of two locations within a city where heterogeneous households make joint location and tenure mode decisions. To investigate the effect of homeownership on equilibrium prices and allocations, we compare the response of this model economy to a labor shock with that of a rental-only version. This comparison yields three results. First, homeownership enables more households to remain in the more desirable location at the expense of newcomers. Second, homeownership adds to the volatility of the housing market. Third, homeownership may amplify the dispersion of household income within a location. Homeownership raises distributional issues. The households who consume the most housing gain the most from the ability to own their home. Newcomers to the city are the main losers.

Language
Englisch

Bibliographic citation
Series: Munich Discussion Paper ; No. 2002-10

Classification
Wirtschaft

Event
Geistige Schöpfung
(who)
Rady, Sven
Ortalo-Magné, François
Event
Veröffentlichung
(who)
Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
(where)
München
(when)
2002

DOI
doi:10.5282/ubm/epub.28
Handle
URN
urn:nbn:de:bvb:19-epub-28-1
Last update
10.03.2025, 11:42 AM CET

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Object type

  • Arbeitspapier

Associated

  • Rady, Sven
  • Ortalo-Magné, François
  • Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät

Time of origin

  • 2002

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