Monopoly in Real Life - The Housing Market, Finance and Inequality

31 Pages Posted: 15 Mar 2017 Last revised: 30 Jan 2019

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Date Written: January 28, 2019

Abstract

This paper uses a simple model based on the board game Monopoly to analyze the drivers of house prices and wealth inequality. Simulations show that the inequality depends on the timing and distribution of home ownership, house price growth and wage growth. An extension of the classical game with interest rates and debt- financing further shows that low interest rates increase house prices and thus inequality by more than high interest rates. The model is also used to analyze the role of foreign investors, excess debt and a "Utopia" setting where every player owns exactly one house. Overall, despite the model's simplicity it presents striking similarities with empirical evidence.

Keywords: house prices; debt; inequality; monetary policy; board game Monopoly

JEL Classification: D10; D31; D42; D63; E47; E58; R30

Suggested Citation

Baur, Dirk G., Monopoly in Real Life - The Housing Market, Finance and Inequality (January 28, 2019). Available at SSRN: https://ssrn.com/abstract=2931257 or http://dx.doi.org/10.2139/ssrn.2931257

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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