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WP201924-House-prices-and-consumption-inequality.pdf
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I characterize how house price shocks affect consumption inequality using a life-cycle model of housing and non-housing consumption with incomplete markets. I derive analytical expressions for the dynamics of inequalities and use these to analyze large house prices swings seen in the UK. I show that movements in consumption inequality were large, that they correspond with the theoretical predictions qualitatively, and that the model explains a large fraction of the movements quantitatively. I demonstrate the accuracy of this analysis using an extended model’s full non-linear solution. Finally, accounting for house price shocks alters estimates of labour-income risks using cross-sectional data.
Authors
Research Associate University of Essex
Ben joined the IFS in 2006 as a PhD scholar and is now a Research Associate, alongside his position as Lecturer at the University of Essex.
Working Paper details
- DOI
- 10.1920/wp.ifs.2019.1924
- Publisher
- The IFS
Suggested citation
Etheridge, B. (2019). House prices and consumption inequality. London: The IFS. Available at: https://ifs.org.uk/publications/house-prices-and-consumption-inequality (accessed: 26 April 2024).
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