Follow us
Publications Commentary Research People Events News Resources and Videos About IFS
Home Publications House prices and consumption inequality

House prices and consumption inequality

IFS Working Paper WP19/24

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.

Deaton inequality website

More on this topic

IFS Working Paper WP19/29
This paper investigates how diļ¬€erent income shocks shape consumption dynamics over the business cycle. First, we break new ground by creating a unique, panel dataset of transitory and permanent income shocks, using subjective income expectations from the Dutch Household Survey.
Working Paper
We derive testable implications of model in which first best allocations are not achieved because of a moral hazard problem with hidden saving.
Journal article | Economica
Over the Great Recession, UK households reduced real food expenditure. We show that they were able to maintain the number of calories that they purchased, and the nutritional quality of these calories, by adjusting their shopping behaviour.
Journal article | Economic Journal
In this paper, we advance the current literature by shedding light on both the motivation for providing intergenerational transfers, and on the nature of preferences for such giving behaviour, by using experimental techniques and revealed preference methods.
Presentation
This is the presentation that Hamish Low gave at the Understanding the Great Recession: from micro to macro conference held at the Bank of England on 23 and 24 September 2015.