Wealth, Composition, Housing, Income and Consumption

40 Pages Posted: 18 Jan 2014 Last revised: 19 Jan 2014

See all articles by William G. Hardin

William G. Hardin

Florida International University (FIU) - College of Business Administration

Sheng Guo

Florida International University

Date Written: January 16, 2014

Abstract

The present research covering the latest residential boom and bust cycle highlights the lack of uniform or constant time invariant wealth, housing and income relations. More important, wealth composition is shown to be a significant determinant of consumption. The marginal effects of housing equity, financial wealth and income differ substantially based on the composition of household wealth. Households with the highest percentage of net worth in financial assets have much lower income effects, have substantially higher marginal effects associated with stock holdings and have housing equity effects that differ noticeably from other households. Income effects for groups with the smallest amounts of relative financial wealth are dramatically higher than for households with greater financial wealth. Wealth and its composition affect consumption.

Keywords: Consumption; Income; Wealth composition; Wealth effect; Housing effect

JEL Classification: G10, G11, G12, G14, E31

Suggested Citation

Hardin, William G. and Guo, Sheng, Wealth, Composition, Housing, Income and Consumption (January 16, 2014). Journal of Real Estate Finance and Economics, Vol. 48, No. 2, 2014, Available at SSRN: https://ssrn.com/abstract=2380183

William G. Hardin

Florida International University (FIU) - College of Business Administration ( email )

Miami, FL 33199
United States

Sheng Guo (Contact Author)

Florida International University ( email )

FIU Economics, DM 318A
11200 SW 8th Street
Miami, FL 33199
United States

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