The Effect of Housing Wealth Losses on Spending in the Great Recession

25 Pages Posted: 27 Feb 2019

See all articles by Marco Angrisani

Marco Angrisani

Center for Economic and Social Research (CESR)

Michael D. Hurd

RAND Corporation; State University of New York at Stony Brook - College of Arts and Science - Department of Economics; National Bureau of Economic Research (NBER)

Susann Rohwedder

RAND Corporation

Date Written: April 2019

Abstract

We use panel data on a complete inventory of household spending and assets to estimate the spending response to the sharp and largely unexpected declines in house values that occurred in the Great Recession. Our study complements the existing literature on this topic by relying exclusively on longitudinal micro data on both household wealth and expenditure. Our data span the period 2002–2012, allowing us to separate trends in spending from innovations in response to unexpected wealth changes. We find the marginal propensity to consume out of an unexpected housing wealth change to be 6 cents per dollar among older American households.

JEL Classification: D12, D14, E21

Suggested Citation

Angrisani, Marco and Hurd, Michael D. and Rohwedder, Susann, The Effect of Housing Wealth Losses on Spending in the Great Recession (April 2019). Economic Inquiry, Vol. 57, Issue 2, pp. 972-996, 2019. Available at SSRN: https://ssrn.com/abstract=3342661 or http://dx.doi.org/10.1111/ecin.12753

Marco Angrisani (Contact Author)

Center for Economic and Social Research (CESR) ( email )

635 Downey Way
Los Angeles, CA 90089-3332
United States

Michael D. Hurd

RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States
310-393-0411 (Phone)
310-393-4818 (Fax)

State University of New York at Stony Brook - College of Arts and Science - Department of Economics ( email )

Stony Brook, NY 11794
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Susann Rohwedder

RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States

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