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Modelling the demand for housing over the lifecycle

Authors: Orazio Attanasio , Renata Bottazzi , Hamish Low , Lars Nesheim and Matthew Wakefield
Date: 01 January 2012
Type: Journal article, Review of Economic Dynamics, Vol. 15, No. 1, pp. 1-18


We model individual demand for housing over the life-cycle, and show the aggregate implications of this behaviour. Individuals delay purchasing their rst home when incomes are low or uncertain. Higher house prices lead households to downsize, rather than to stop being owners. Fixed costs (property transactions taxes) have important impacts on welfare (a wealth e ect) and house purchase decisions (substitution e ect). In aggregate, positive house price shocks lead to consumption booms among the old but falls in consumption for the young, and reduced housing demand; positive income shocks lead to consumption booms among the young and increased housing demand.

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