CEF.UP – FIN Seminar/Webinar

Thursday – October 26^th, 2023 at 1:00 p.m. | Room 305| Online

“Housing and Savings Behavior Across Family Types“

Annika Bacher– BI Norwegian Business School

Abstract:

“Does marital status affect households’ investment choices? Is accounting for distinct family types necessary for the correct evaluation of policies that aim at stimulating housing demand? To answer these questions, I develop a life-cycle model of housing and financial portfolio choice with dynamic and heterogeneous family types. I find that divorce risk encourages couples to accumulate liquid financial assets and reduces their demand for illiquid housing. Expected marriage, low income levels, and larger exposure to income fluctuations prevent singles from becoming homeowners. Abstracting from distinct family types amplifies the attractiveness of housing and, as a result, overstates the effectiveness of housing policies such as lowering property taxes and reducing transaction costs. Importantly, this misspecification is largest for young households who are often directly targeted by policies that aim at increasing homeownership rates.”