Borrowing Constraints, Own Labour and Homeownership: Does it Pay to Paint Your Walls?

40 Pages Posted: 5 Oct 2020

See all articles by Peter Lindner

Peter Lindner

Oesterreichische Nationalbank (OeNB)

Thomas Y. Mathä

Banque centrale du Luxembourg

Giuseppe Pulina

Universita di Cagliari

Michael Ziegelmeyer

Banque centrale du Luxembourg; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Social Law and Social Policy

Date Written: October, 2020

Abstract

Using a dedicated set of questions in the 2014 Luxembourg Household Finance and Consumption Survey (LU-HFCS), we show that a substantial share of households contributes their own labour to the acquisition of their main residence. These contributions help households faced with credit constraints, since they reduce the need for external financing. We develop a simple theoretical model and show that own labour contributions decrease with the level of financial resources available, while they increase with the mortgage interest rate. These theoretical results are supported by empirical analysis, which also shows that own labour contributions vary by household characteristics (age, gender, profession) and by type of dwelling (house, apartment).

Keywords: D14, E43, G21, R21

JEL Classification: D14, E43, G21, R21

Suggested Citation

Lindner, Peter and Mathä, Thomas Y. and Pulina, Giuseppe and Ziegelmeyer, Michael Heinrich, Borrowing Constraints, Own Labour and Homeownership: Does it Pay to Paint Your Walls? (October, 2020). ECB Working Paper No. 20202474, Available at SSRN: https://ssrn.com/abstract=3703657 or http://dx.doi.org/10.2139/ssrn.3703657

Peter Lindner (Contact Author)

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Thomas Y. Mathä

Banque centrale du Luxembourg ( email )

2, bd Royal
L-2983 Luxembourg
Luxembourg
+352 4774 4270 (Phone)
+352 4774 4920 (Fax)

Giuseppe Pulina

Universita di Cagliari ( email )

Cagliari, 09124
Italy

Michael Heinrich Ziegelmeyer

Banque centrale du Luxembourg ( email )

2, boulevard Royal
Luxembourg, L-2983
Luxembourg

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Social Law and Social Policy ( email )

Amalienstraße 33
München, 80799
Germany

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