Do rising tides lift all prices? Income inequality and housing affordability

Janna L. Matlack and Jacob Vigdor

Journal of Housing Economics, 2008, vol. 17, issue 3, 212-224

Abstract: Simple partial equilibrium models suggest that income increases at the high end of the distribution can raise prices paid by those at the low end of the income distribution. This prediction does not universally hold in a general equilibrium model, or in models where the rich and poor consume distinct products. We use Census microdata to evaluate these predictions empirically, using data on housing markets in American metropolitan areas between 1970 and 2000. In markets with low-vacancy rates, increases in income at the high end of the distribution are associated with significantly higher rents per room and greater crowding among households headed by a high school dropout. Similar effects are not observed in markets with above-average vacancy rates.

Keywords: Rent; Crowding; Low-income (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (23)

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Working Paper: Do Rising Tides Lift All Prices? Income Inequality and Housing Affordability (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:17:y:2008:i:3:p:212-224

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