Housing Over Time and Over the Life Cycle: A Structural Estimation

24 Pages Posted: 15 Nov 2016

See all articles by Wenli Li

Wenli Li

Federal Reserve Bank of Philadelphia

Haiyong Liu

East Carolina University - Department of Economics

Fang Yang

Louisiana State University, Baton Rouge

Rui Yao

Baruch College - Department of Economics and Finance

Multiple version iconThere are 4 versions of this paper

Date Written: November 2016

Abstract

We construct a model of optimal life‐cycle housing and nonhousing consumption and estimate the elasticity between the two goods to be 0.487. The estimate is robust to different assumptions of housing adjustment cost, but sensitive to the choice of sample period and the degree of aggregation of data moments. We then conduct experiments in which house prices and household income fluctuate. Compared with the benchmark, the impact of the shocks on homeownership rates is reduced, but the impact on nonhousing consumption is magnified when housing service and nonhousing consumption are highly substitutable or when the house selling cost is sizable.

Suggested Citation

Li, Wenli and Liu, Haiyong and Yang, Fang and Yao, Rui, Housing Over Time and Over the Life Cycle: A Structural Estimation (November 2016). International Economic Review, Vol. 57, Issue 4, pp. 1237-1260, 2016. Available at SSRN: https://ssrn.com/abstract=2869489 or http://dx.doi.org/10.1111/iere.12196

Wenli Li (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Haiyong Liu

East Carolina University - Department of Economics ( email )

Brewster Building
Greenville, NC 27858
United States

Fang Yang

Louisiana State University, Baton Rouge ( email )

Baton Rouge, LA 70803
United States

HOME PAGE: http://faculty.bus.lsu.edu/fyang/

Rui Yao

Baruch College - Department of Economics and Finance ( email )

One Bernard Baruch Way
Box B10-225
New York, NY 10010
United States
646-312-3494 (Phone)
646-312-3451 (Fax)

HOME PAGE: http://zicklin.baruch.cuny.edu/faculty/profiles/yao.html

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