Do Rising Tides Lift All Prices? Income Inequality and Housing Affordability

Janna L. Matlack and Jacob Vigdor

No 12331, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Simple partial-equilibrium models suggest that income increases at the high end of the distribution can raise price paid by those at the low end of the income distribution. This prediction does not universally hold in a general equilibrium model, or in models where the rich and poor consume distinct products. We use Census microdata to evaluate these predictions empirically, using data on housing markets in American metropolitan areas between 1970 and 2000. Evidence clearly and unsurprisingly shows that decreases in one's own income lead to less housing consumption and less income left over after paying for housing. The effect of increases in others' income, holding one's own income constant, is more nuanced. In tight housing markets, the poor do worse when the rich get richer. In slack markets, at least some evidence suggests that increases in others' income, holding own income constant, may be beneficial.

JEL-codes: D12 D31 I31 R21 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-geo and nep-ure
Note: AP EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Matlack, Janna L. & Vigdor, Jacob L., 2008. "Do rising tides lift all prices? Income inequality and housing affordability," Journal of Housing Economics, Elsevier, vol. 17(3), pages 212-224, September.

Downloads: (external link)
http://www.nber.org/papers/w12331.pdf (application/pdf)

Related works:
Journal Article: Do rising tides lift all prices? Income inequality and housing affordability (2008)
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:nbr:nberwo:12331

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w12331

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().