An Aggregate Economy with Different Size Houses

José-Víctor Ríos-Rull and Virginia Sanchez-Marcos

Journal of the European Economic Association, 2008, vol. 6, issue 2-3, 705-714

Abstract: We build an aggregate model with different size houses and liquid assets. Typical households are born, are subject to idiosyncratic earnings risk, and save for both life-cycle reasons and housing reasons. Typically, a subset of these households, after accumulating some assets, make a down payment and buy a small starter's house or flat. As time passes, some households upgrade to a larger and nicer house. Households with houses may also eventually downgrade to a flat or even to no house and flat owners may sell. Our specification attempts to replicate some important features of modern aggregate economies: The distribution of earnings and of housing and non-housing wealth as well as some macroeconomic aggregates, including features of the mortgage issuing sector. (JEL: E21) (c) 2008 by the European Economic Association.

JEL-codes: E21 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (33)

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