NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The General Equilibrium Effects of Inflation on Housing Consumption and Investment

James Berkovec, Don Fullerton

NBER Working Paper No. 2826 (Also Reprint No. r1248)
Issued in 1989
NBER Program(s):   PE

In a mean-variance portfolio choice model, each of 3,578 households from the 1983 Survey of Consumer Finances has calculated preferences over housing, other consumption, and risk. Each household is constrained such that any owner-occupied housing in portfolio must match housing services consumed. Corporate taxes are modeled in some detail, and regression coefficients are used to estimate the adjusted gross income, itemizable deductions, and statutory marginal tax rate of each household. General equilibrium simulation results indicate that inflation does not necessarily increase total owner housing. Top-bracket households increase their owner housing, while others switch into bonds. The greater number of households in low-brackets implies that the homeownership rate can fall even if the amount of owner housing rises.

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Document Object Identifier (DOI): 10.3386/w2826

Published: American Economic Review, vol. 79, no.2, pp.277-282, (May 1989). citation courtesy of

 
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