Non-Durable Consumption and Housing Net Worth in the Great Recession: Evidence from Easily Accessible Data

30 Pages Posted: 9 May 2016

See all articles by Greg Kaplan

Greg Kaplan

Princeton University - Department of Economics

Kurt Mitman

Stockholm University; Centre for Economic Policy Research (CEPR)

Giovanni L. Violante

New York University, Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: May 2016

Abstract

In an influential paper, Mian, Rao, and Sufi (2013) exploit geographic variation to measure the effect of the fall in housing net worth on household expenditures during the Great Recession. Their widely-cited estimates are based on proprietary house price and proprietary expenditure data and therefore not easily replicable. We use alternative data on a subset of non-durable goods and on house prices, which are more easily accessible, to replicate their study. When estimating their same specification on our data, we obtain values for the elasticity of expenditures to the housing net worth shock that are virtually indistinguishable from theirs. However, our robustness analyses with respect to alternative model specifications yield more nuanced conclusions about the separate roles of house prices and initial housing exposure/leverage for the drop in expenditures. Moreover, the estimated elasticity is consistent, theoretically and quantitatively, with a simple calibrated model with wealth effects where leverage and credit constraints play no role.

Suggested Citation

Kaplan, Greg and Mitman, Kurt and Violante, Giovanni L., Non-Durable Consumption and Housing Net Worth in the Great Recession: Evidence from Easily Accessible Data (May 2016). NBER Working Paper No. w22232, Available at SSRN: https://ssrn.com/abstract=2777320

Greg Kaplan (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Kurt Mitman

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Giovanni L. Violante

New York University, Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-992-9771 (Phone)
212-995-4186 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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