Borrowing constraints, own labour and homeownership: Does it pay to paint your walls?

Peter Lindner, Thomas Mathä, Giuseppe Pulina and Michael Ziegelmeyer

No 148, BCL working papers from Central Bank of Luxembourg

Abstract: Using a dedicated set of questions in the 2014 Luxembourg Household Finance and Consumption Survey (LU-HFCS), we show that a substantial share of households contributes their own labour to the acquisition of their main residence. These contributions help households faced with credit constraints, since they reduce the need for external financing. We develop a simple theoretical model and show that own labour contributions decrease with the level of financial resources available, while they increase with the mortgage interest rate. These theoretical results are supported by empirical analysis, which also shows that own labour contributions vary by household characteristics (age, gender, profession) and by type of dwelling (house, apartment).

Keywords: Borrowing constraints; down payment; own labour; sweat equity; homeownership; household; survey. (search for similar items in EconPapers)
JEL-codes: D14 E43 G21 R2 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2020-08
New Economics Papers: this item is included in nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.bcl.lu/en/publications/Working-papers/148/BCLWP148.pdf (application/pdf)

Related works:
Journal Article: Borrowing constraints, own labour and homeownership (2023)
Working Paper: Borrowing constraints, own labour and homeownership: does it pay to paint your walls? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bcl:bclwop:bclwp148

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