The Housing Cost Disease

Pietro Reichlin and Nicola Borri

No 10756, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We use a simple two-sector, life-cycle economy with bequests to explain the increasing wealth to income ratio, housing wealth and wealth inequality that have been observed in several countries over the long-run as a consequence of a rising labor efficiency in manufacturing (housing cost disease). When consumption inequality across households is sufficiently large, the housing cost disease has adverse effects on a measure of social welfare based on an egalitarian principle: the higher the housing's value appreciation, the lower the welfare benefit of a rising labor efficiency in manufacturing.

Keywords: Capital; Housing; Productivity; Wealth; Wealth inequality (search for similar items in EconPapers)
JEL-codes: D9 E2 O4 (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (5)

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Journal Article: The housing cost disease (2018)
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