The Housing Rental Rate Elasticity of Aggregate Consumption: A Panel Study for OECD Countries

Dieter Gstach

European Journal of Housing Policy, 2007, vol. 7, issue 4, 367-382

Abstract: This paper investigates the impact of changing housing rental rates upon aggregate consumption based on yearly data for 18 OECD countries observed between 1970 and 2004. Estimates of long run elasticities are derived from cointegrating relationships with panel estimation techniques and compared with estimates implicitly given in short run dynamic equations. The results across all estimation approaches yield similar magnitudes and indicate a significantly negative impact of rental rate increases upon aggregate consumption. For the EU-25 or the USA, for example, relevant elasticities lie in the range between −0.13 and −0.17. The jointly estimated elasticities of the wealth components seem unaffected, relative to previous studies, by the inclusion of the rental housing market variables.

Date: 2007
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DOI: 10.1080/14616710701650419

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