Housing wealth and economic decisions: a natural experiment


Funding source

Swedish Research Council - Vetenskapsrådet (VR)

Project Details

Start date: 01/01/2013
End date: 31/12/2016
Funding: 3000000 SEK


Housing is the largest form of wealth for most households. Because of its size, the value of residential property is believed to affect household consumption and savings decisions and ultimately the aggregate economy too. Housing decisions are also intimately related with family planning choices such as moves, career progress and marriages. These lifestyle decisions are in turn of prime relevance for long-term economic development. Despite its importance, the quantitative, and sometimes even qualitative, effects of changes in housing wealth and housing arrangements on households? decisions are still unknown or under debate. The empirical analysis is hampered by two obstacles. First, there is a lack of reliable and comprehensive micro-data on household finances and decisions. Second, it is very difficult to establish whether housing wealth and housing arrangements are the effect or the cause of household decisions. In this project we overcome both of these obstacles by using a regression discontinuity design applied to a natural experiment. The natural experiment is created by the institutional features of the Swedish rental and co-op markets. We follow households that have become homeowners virtually randomly to establish the role of housing wealth and housing arrangements on consumption and savings but also on lifestyle choices. We expect our results to have significant impact in the academic community as well as in the policy debate.

External Partners

Last updated on 2017-31-07 at 12:48