On the Negative Relationship between Labor Income Uncertainty and Homeownership: Risk Aversion vs. Credit Constraints

Luis Diaz-Serrano ()

No 1208, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Barriers to homeownership have traditionally been an important research and policy issue. In particular, the role of income volatility and credit constraints have been one of the main focuses in this concern. In this paper we test for the first time whether the underlying nature behind the negative effect of income uncertainty on the owner-occupancy propensities is driven by risk aversion, as it is assumed in most of the theoretical models, or on the contrary it is driven by credit constraints. The former question emerges from the plausible assumption that households facing higher income volatility are also expected to face borrowing constraints. To disentangle this puzzle, we use an unusually rich data coming from the Italian Survey of Household Income and Wealth carried out by the Bank of Italy. Our results confirm that in Italy both labor income uncertainty and credit constraints exert a significant negative effect on the probability of homeownership. Our main findings indicate that the negative relationship between labor income uncertainty and the owner-occupancy propensities are just driven by households’ risk aversion, while credit constraints play no role.

Keywords: homeownership; income uncertainty; credit constraints; risk aversion (search for similar items in EconPapers)
JEL-codes: D1 J0 R0 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2004-07
New Economics Papers: this item is included in nep-geo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - published in: Journal of Housing Economics, 2005, 14 (2), 109-126

Downloads: (external link)
https://docs.iza.org/dp1208.pdf (application/pdf)

Related works:
Journal Article: On the negative relationship between labor income uncertainty and homeownership: Risk-aversion vs. credit constraints (2005)
Working Paper: On the Negative Relationship between Labor Income Uncertainty and Homeownership: Risk Aversion vs. Credit Constraints (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp1208

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().