Homeownership and the Bank of Mom and Dad (Job Market Paper)
Abstract: How much of the homeownership rate among young households is accounted for by parental transfers? I build and estimate a life-cycle overlapping generations model with illiquid housing, in which the child and parent interact without commitment. I find that parental transfers account for 15 p.p. (31%) of the homeownership rate of young adults. Parental transfers increase homeownership for households with wealthier parents by relaxing borrowing constraints and reducing housing risk. Moreover, illiquid housing entails expenditure commitments, changing the strategic behaviour of households. Children with wealthy parents increase their consumption of illiquid housing to extract larger transfers, leading to a preference for illiquidity: 17% of 25-year old households prefer their own housing to be illiquid. Finally, I find that policies that decrease the sales cost of housing would be effective at increasing homeownership and decreasing the role of parent wealth in determining children's housing outcomes.
Conference Presentations: 10th European Meeting of the Urban Economics Association (scheduled), Consumer Financial Protection Bureau (CFPB) Research Conference (scheduled), Young Economist Symposium 2020 at University of Pennsylvania, Oxford NuCamp Virtual Macro Workshop, Minnesota-Wisconsin Macro/International Workshop (2020), Annual Society for Economic Theory Conference (SAET) 2019
Stock Market Participation and Exit: The Role of Homeownership
PDF (revision coming soon)
Abstract: This paper argues that a large part of the stock market participation puzzle is driven by high stock market exit rates among participants: In the US, 20%of households who have stock hold no stocks two years later. Using survey data I show that stock market exit largely coincides with renting households becoming first-time owners. After estimating a life-cycle model of portfolio choice with housing and per-period participation costs, I show that it can quantitatively match the US participation rate over the entire life-cycle. The model matches the high exit rate of new homeowners, while tying up wealth in housing reduces the participation rate among middle-aged and retired households.The estimated model jointly matches the participation rate, homeownership rate, net worth and conditional portfolio weights over the life cycle. Housing reduces the unexplained participation gap between the model and the data by 75%, compared to a model without housing.
Conference Presentations: CEPR Sixth European Workshop on Household Finance (2021, scheduled), Ohio State PhD Conference on Real Estate and Housing (2019), Minnesota-Wisconsin Macro/International Workshop (2019), Midwest Macroeconomic Meetings (2018)
Intra-family Insurance, Portfolio Choice, and Inter-generational Wealth Inequality (w. Joel McMurry)
How Much Do Parent Wealth and Transfers Contribute To the Black-White Homeownership Gap?
Publications in Norwegian
Fattig i fjor - fattig i år? Tilstandsavhengighet i innvandrerfattigdom, joint with Manudeep Bhuller, Søkelys på arbeidslivet, vol. 3 (2014)
Fattigdomsdynamikk blant innvandrere, joint with Manudeep Bhuller, Statistics Norway Reports, vol. 40 (2013)