Economic Consequences of Housing Speculation

54 Pages Posted: 18 Nov 2019

See all articles by Zhenyu Gao

Zhenyu Gao

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Michael Sockin

University of Texas at Austin - Red McCombs School of Business

Wei Xiong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: November 2019

Abstract

By exploiting variation in state capital gains taxation as an instrument, we analyze the economic consequences of housing speculation during the U.S. housing boom in the 2000s. We find that housing speculation, anchored, in part, on extrapolation of past housing price changes, led not only to greater price appreciation, economic expansions, and housing construction during the boom in 2004-2006, but also to more severe economic downturns during the subsequent bust in 2007-2009. Our analysis supports supply overhang and local household demand as two key channels for transmitting these adverse effects.

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Suggested Citation

Gao, Zhenyu and Sockin, Michael and Xiong, Wei, Economic Consequences of Housing Speculation (November 2019). NBER Working Paper No. w26457, Available at SSRN: https://ssrn.com/abstract=3488957

Zhenyu Gao (Contact Author)

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

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Michael Sockin

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States

Wei Xiong

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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