The Contribution of Housing to the Dynamics of Inequalities

GATE Working Paper No. 1215

39 Pages Posted: 24 May 2012

Date Written: May 24, 2012


This paper proposes a unified framework for the analysis of inequalities. In contrast to the former literature on inequalities, housing is included as a major determinant of individual saving behavior. Disparities across locations affect individual outcomes in both labor and education markets. In a Bewley-Huggett-Aiyagari type model where several frictions are represented, the model allows for segmentation between homeowners and renters in the housing market, imperfection in the capital market and residential mobility over the life-cycle. Moreover, individual location is assumed to affect labor productivity, wealth accumulation via the dynamics of housing prices and the human capital acquisition process of the next generation. The dynamics of prices combined to bequest motive provide the perfect framework to understand the tenure choice of individuals. Furthermore, the fixity of housing supply in each neighborhood combined with borrowing constraints prevent some households from living in their preferred area, which leads to segregation. Using this general framework, the paper contributes to the understanding of the complex relationships between labor, housing and education markets. Finally, several experiments aimed at decreasing the level of inequalities at the individual and location level are provided.

Keywords: heterogeneous agents, Inequalities, wealth distribution, housing

JEL Classification: E24, I30, R23

Suggested Citation

Sidibe, Modibo, The Contribution of Housing to the Dynamics of Inequalities (May 24, 2012). GATE Working Paper No. 1215, Available at SSRN: or

Modibo Sidibe (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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