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Homeownership and portfolio choice over the generations

Gonzalo Paz-Pardo

No 2522, Working Paper Series from European Central Bank

Abstract: Earnings are riskier and more unequal for households born in the 1960s and 1980s than for those born in the 1940s. Despite the improvements in financial conditions, younger generations are less likely to be living in their own homes than older generations at the same age. By using a life-cycle model with housing and portfolio choice that includes flexible earnings risk and aggregate asset price risk, I show that changes in earnings dynamics account for a large part of the reduction in homeownership across generations. Lower-income households find it harder to buy housing, and as a result accumulate less wealth. JEL Classification: D31, E21, E24, G11, J31

Keywords: earnings risk; housing demand; intergenerational inequality; wealth accumulation (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-age, nep-dge, nep-lma and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20212522

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