The housing cost disease

Nicola Borri and Pietro Reichlin

Journal of Economic Dynamics and Control, 2018, vol. 87, issue C, 106-123

Abstract: Using a simple two-sector life cycle economy with housing services and bequests, we show that a rising labor efficiency in the general economy relative to the construction sector can go a long way toward explaining a significant fraction of the rising trends in wealth-to-income ratios, housing wealth, and wealth inequality, that have been documented in most advanced countries at least since the ’70s. This mechanism (which we label housing cost disease) has adverse effects on social welfare when the Planner puts sufficient weight on the less wealthy households.

Keywords: Housing wealth; Cost disease; Overlapping generations; Wealth inequality (search for similar items in EconPapers)
JEL-codes: D91 G1 H2 O11 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Working Paper: The Housing Cost Disease (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:87:y:2018:i:c:p:106-123

DOI: 10.1016/j.jedc.2017.12.001

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