Working Paper No. 1262

The Housing Wealth Effect: Quasi-Experimental Evidence

Published: February 5, 2019Pages: 76Keywords: House prices; Housing wealth; Consumption; House price elasticity; Marginal propensity to consume; Collateral effectJEL-codes: D12; E21; E32; E44; E60

The Housing Wealth Effect: Quasi-Experimental Evidence Dany Kessel, Björn Tyrefors and Roine Vestman


We exploit a quasi-experiment to provide new evidence on the magnitude of the housing wealth effect. We estimate an immediate shock of approximately 15% to house prices close to one of Stockholm's airports after its operations were unexpectedly continued as a result of political bargaining. This source of price variation is ideal to identify housing wealth effects since it is local and unrelated to variation in macroeconomic conditions.

Using a household data set with granular geographic information on location of primary residence, we find an elasticity of 0.45 among purchasers of new cars. Converting our estimate to an aggregate MPC on cars, it is however only 0.13 cents per dollar. The MPC is entirely concentrated to homeowners with a combined loan-to-value ratio between 0.6 and 0.8 which, on the one hand, confirms the key role of household balance sheets but on the other hand refutes a monotone relationship between response and household leverage.

 

Björn Tyrefors

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Ph: +46 8 665 4521
bjorn.tyrefors@ifn.se

Dany Kessel

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Mob: +46 70 717 3802
dany.kessel@ifn.se

Global index of the sharing economy

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2018 Bergh Funcke Wernberg - Timbro Sharing Economy Index-1fHemsidan.jpg

Andreas Bergh, IFN and Lund University, is one of the authors of this book. The Timbro Sharing Economy Index is the first global index of the sharing economy. The index has been compiled using traffic volume data and scraped data, and provides a unique insight into the driving factors behind the peer-to-peer economy.

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