Housing Wealth and Aggregate Saving

Jonathan Skinner

NBER Working Paper No. 2842
Issued in February 1989
NBER Program(s):   PE

The recent appreciation in housing value can have large effects on aggregate saving. This paper uses a simulation model to show that aggregate saving will decline substantially if life cycle homeowners spend down their housing windfalls. Homeowners with a bequest motive, however, may save more to assist their children in buying the now more expensive housing. To test whether families spend their housing capital gains, I use housing, income, and consumption data from the Panel Study of Income Dynamics. While a cross-section time-series regression implies that housing wealth does affect saving, a fixed-effects model finds no effect.

(285 K)

(187 K)

Published:

• Skinner, Jonathan. "Housing Wealth And Aggregate Saving," Regional Science and Urban Economics, 1989, v19(2), 305-324. ,
• Regional Science and Urban Economics, vol. 19, 1989, pp.305-324.

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