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A Life-Cycle Analysis of Social Security with Housing

Author

Listed:
  • Kaiji Chen

    (University of Oslo)

Abstract
This paper incorporates two features of housing in a life-cycle analysis of social security: housing as a durable good and housing market frictions. We find that both housing quantities and homeownership rates respond strongly to eliminating social security. Accordingly, the aggregate impacts of this policy reform are significantly larger in an economy with explicit housing choices than in a standard life-cycle economy. Our analysis shows that the key mechanism behind these results is the substitution effects of a change in interest rates and, thus, the price of housing services on the choice of non-durable consumption versus housing services. (Copyright: Elsevier)

Suggested Citation

  • Kaiji Chen, 2010. "A Life-Cycle Analysis of Social Security with Housing," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 597-615, July.
    • Handle: RePEc:red:issued:08-199
    DOI: 10.1016/j.red.2009.10.001
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    References listed on IDEAS

    as
    1. Morris A. Davis, 2010. "housing and the business cycle," The New Palgrave Dictionary of Economics,, Palgrave Macmillan.
    2. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2010. "Winners and Losers in House Markets," Working Papers 2010-5, Central Bank of Cyprus.
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    4. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2011. "Winners and Losers in Housing Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 255-296, March.
    5. Martin Feldstein, 1985. "The Optimal Level of Social Security Benefits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(2), pages 303-320.
    6. Marjorie Flavin & Takashi Yamashita, 2002. "Owner-Occupied Housing and the Composition of the Household Portfolio," American Economic Review, American Economic Association, vol. 92(1), pages 345-362, March.
    7. Gervais, Martin, 2002. "Housing taxation and capital accumulation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1461-1489, October.
    8. Inder J Ruprah & Luis T Marcano, 2007. "A Meta-Impact Evaluation of Social Housing Programs: The Chilean Case," OVE Working Papers 0207, Inter-American Development Bank, Office of Evaluation and Oversight (OVE).
    9. Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2003. "A welfare analysis of social security in a dynastic framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1247-1274, November.
    10. Fang Yang, 2009. "Consumption over the Life Cycle: How Different is Housing?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(3), pages 423-443, July.
    11. Inder J. Ruprah & Luis Marcano, 2007. "A Meta-Impact Evaluation of Social Housing Programs: The Chilean Case," IDB Publications (Working Papers) 33418, Inter-American Development Bank.
    12. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
    13. Rui Yao, 2005. "Optimal Consumption and Portfolio Choices with Risky Housing and Borrowing Constraints," The Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 197-239.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Durable goods; Housing market frictions; Housing tenure choice; Social security;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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