 Distributional Costs of Housing-price Bubbles: Who pays the Price when Bubbles Deflate?Cynthia Bansak and Martha Starr () Review of Social Economy, 2015, vol. 73, issue 4, 341-369 Abstract: In considering whether asset-price bubbles should be offset through policy, an important issue is who pays the price when the bubble bursts. A bust that reduces the wealth of well-off households only may have small welfare costs, but costs may be sizable if broad swaths of households are affected. This paper uses micro data on millions of households from the US American Community Survey to examine how the bursting of the 1998--2006 housing bubble affected households’ employment, homeownership, home values, and housing costs. To separate dynamics of the housing bust from those of the aggregate downturn, we differentiate between metropolitan areas that did and did not experience bubbles. We find that, for most measures, deteriorations in well-being were more severe in bubble metros than elsewhere, and for several measures, differential effects on less-educated households were also more severe. This underscores the importance of leaning against broad-based housing bubbles via appropriate policies, as burdens of adjustment fall differentially on people not well prepared to bear them. Date: 2015 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:rsocec:v:73:y:2015:i:4:p:341-369 Ordering information: This journal article can be ordered from DOI: 10.1080/00346764.2015.1089108 Access Statistics for this article Review of Social Economy is currently edited by Wilfred Dolfsma and John Davis More articles in Review of Social Economy from Taylor & Francis Journals |
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