Housing habits and their implications for life-cycle consumption and investment
- We set up and solve a rich life-cycle model of household decisions involving consumption of both perishable goods and housing services, stochastic and unspanned labor income, stochastic house prices, home renting and owning, stock investments, and portfolio constraints. The model features habit formation for housing consumption, which leads to optimal decisions closer in line with empirical observations. Our model can explain (i) that stock investments are low or zero for many young agents and then gradually increasing over life, (ii) that the housing expenditure share is age- and wealth-dependent, (iii) that perishable consumption is more sensitive to wealth and income shocks than housing consumption, and (iv) that non-housing consumption is hump-shaped over life.
| Author: | Holger KraftGND, Claus MunkORCiDGND, Sebastian Wagner |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-371020 |
| URL: | http://ssrn.com/abstract=2568518 |
| DOI: | https://doi.org/10.2139/ssrn.2568518 |
| Parent Title (English): | SAFE working paper series ; No. 85 |
| Series (Serial Number): | SAFE working paper (85) |
| Publisher: | SAFE |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Date of Publication (online): | 2015/02/24 |
| Date of first Publication: | 2015/02/24 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2015/03/10 |
| Tag: | consumption hump; habit formation; housing expenditure share; human capital; life-cycle household decisions; renting vs. owning home; stock market participation |
| Issue: | February 18, 2015 |
| Page Number: | 65 |
| HeBIS-PPN: | 357671430 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
