The Engel curve of owner-occupied housing consumption

Erling Røed Larsen
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Erling Røed Larsen: BI Norwegian Business School and Eiendomsverdi

Journal of Applied Economics, 2014, vol. 17, 325-352

Abstract: Housing is a major component of aggregate demand, and understanding how the demand for housing co-varies with income is useful for analysis and policy. While estimating housing consumption for tenants amounts to observing rents, estimating housing consumption for owner-occupiers is challenging because it is not directly observable and interest payments vary with re-paid principals. In order to examine the housing consumption for owneroccupiers, this article combines micro data sets on income and imputed rents for owneroccupiers based on home attributes from a consumer expenditure survey and monthly rents in a rental survey. This allows estimation of an Engel curve of owner-occupied consumption, both parametrically and non-parametrically. Regression results demonstrate that the income share of owner-occupied housing consumption decreases with income, while the Engel elasticity computed at the mean is 0.32 and increasing in income.

Keywords: consumption; Engel curve; Engel elasticity; housing; imputed rent; owner-occupier (search for similar items in EconPapers)
JEL-codes: C21 D12 D63 H23 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cem:jaecon:v:17:y:2014:n:2:p:325-352

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