Capital Leakage, House Prices, and Consumer Spending: Quasi-Experimental Evidence from House Purchase Restriction Spillovers
85 Pages Posted: 17 Jan 2020 Last revised: 16 Apr 2021
Date Written: April 30, 2018
Employing a unique quasi-experiment – spillovers caused by the imposition of local house purchase restrictions to nearby non-regulated cities, we study the house price and real spending effects of out-of-town housing demand and policy spillovers. The quasi-experiment induces sharp abnormal increases in house prices but not local fundamentals in nearby non-regulated cities, providing plausibly exogenous house price booms. The estimated spending response is positive in the aggregate, and is redistributive echoing Favilukis and Van Nieuwerburgh (forthcoming), negative for renters, but positive for homeowners. Our results suggest that the “pure” housing wealth effect can engineer powerful real consequences.
Keywords: consumer spending, house prices, wealth effect, quasi-experiment, policy spillovers, out-of-town demand
JEL Classification: E21, G12, G18, H23, R21, R51
Suggested Citation: Suggested Citation