Supersedes Working Paper 09-7. We estimate a structural model of optimal life-cycle housing and nonhousing consumption in the presence of labor income and house price uncertainties. The model postulates constant elasticity of substitution between housing service and nonhousing consumption and...

This paper incorporates home production into a dynamic general equilibrium model of overlapping generations with endogenous retirement to study Social Secu- rity reforms. As such, the model di¤erentiates both consumption goods and labor e¤ort according to their respective roles in home...

Superseded by Working Paper 15-04. We estimate a structural model of optimal life-cycle housing and consumption in the presence of realistic labor income and house price uncertainties. The model postulates constant elasticity of substitution between housing service and nonhousing consumption,...

understanding of housing market developments on general activities. We use the estimated model to conduct policy experiments and find that consumption responds nonlinearly to changes in housing wealth with an average marginal propensity to consume out of housing wealth of about 5 percent.

In this article, we explore whether relative risk aversion varies with wealth. First, we derive theoretical predictions on how risky shares respond to wealth uctuations in a portfolio choice model with both external habits and time-varying labor income. Our analytical results indicate that: (1)...

We document the growth in higher education costs and tuition over the past 50 years. To explain these trends, we develop a general equilibrium model with skill- and sector-biased technical change. Finding the model’s parameters through a combination of estimation and calibration, we show that...

The authors develop a life-cycle model to study the effects of house price changes on household consumption and welfare. The model explicitly incorporates the dual feature of housing as both a consumption good and an investment asset and allows for costly adjustments in housing and mortgage...

We develop a life-cycle model that explicitly incorporates the dual feature of housing as both a consumption good and an investment asset. Our analysis indicates that the consumption and welfare consequences of house price changes on individual households vary significantly. In particular, the...

Wenli Li and Rui Yao present their recent research, which tries to quantify the effects of house-price changes on both consumption and the well-being of American households. Their study looks at the economy as a whole, as well as different demographic groups.

In this paper, we study a household’s optimal life-cycle housing choices by calibrating a model with uninsurable labor income and house price risks. In our setup, the household not only decides between renting and owning a house, but also chooses the size of its house. Borrowing is...