TY  - JOUR
AU  - Lustig,Hanno
AU  - Nieuwerburgh,Stijn Van
TI  - How Much Does Household Collateral Constrain Regional Risk Sharing?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10505
PY  - 2004
Y2  - May 2004
UR  - http://www.nber.org/papers/w10505
L1  - http://www.nber.org/papers/w10505.pdf
N1  - Author contact info:
Hanno Lustig
UCLA Anderson School of Management
110 Westwood Plaza, Suite C413
Los Angeles, CA 90095-1481
Tel: 310/825-1011
Fax: 310/825-9528
E-Mail: hlustig@anderson.ucla.edu

Stijn Van Nieuwerburgh
Stern School of Business
New York University
44 W 4th Street, Suite 9-120
New York, NY 10012
Tel: 646/284-4141
Fax: 646/284-4141
E-Mail: svnieuwe@stern.nyu.edu
AB  - 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.
ER  -