@techreport{NBERw10505,
 title = "How Much Does Household Collateral Constrain Regional Risk Sharing?",
 author = "Hanno Lustig and Stijn Van Nieuwerburgh",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "10505",
 year = "2004",
 month = "May",
 URL = "http://www.nber.org/papers/w10505",
 abstract = {We construct a new data set of consumption and income data for the largest US metropolitan  areas, and we show that the covariance of regional consumption and income growth varies  over time and in the cross-section. In times and regions where collateral is scarce, regional  consumption growth is about twice as sensitive to income growth. Household-level borrowing  frictions can explain this new stylized fact. When the value of housing relative to human wealth  falls, loan collateral shrinks, borrowing (risk-sharing) declines, and the sensitivity of consumption  to income increases. Our model aggregates heterogeneous, borrowing-constrained households  into regions characterized by a common housing market. The resulting regional consumption  patterns quantitatively match those in the data.},
}