Inequality and House Prices
نویسنده
چکیده
This paper studies the interaction between inequality and house prices using an incomplete market model with heterogeneous households. The model links cross-sectional household portfolio saving decisions to housing market outcomes. It illustrates a new price formation mechanism in which an investment motive among the wealthy plays a key role. A quantitative application of the theory rationalizes the recent substantial housing boom accompanied by rising saving rates in China. The theory in this paper shows that market frictions can have a differential impact cross-sectionally, increasing inequality. Inequality can in turn amplify frictions in the market. JEL Codes: E21, G11, P22, R20.
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تاریخ انتشار 2015