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Housing Wealth Effects: Cross‐sectional Evidence from New Vehicle Registrations
Author(s) -
Gillitzer Christian,
Wang Jin Cong
Publication year - 2016
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.12277
Subject(s) - proxy (statistics) , marginal propensity to consume , consumption (sociology) , economics , econometrics , income elasticity of demand , specification , price elasticity of demand , microeconomics , statistics , monetary economics , mathematics , social science , sociology , market liquidity
We investigate the relationship between housing wealth and consumption using postcode‐level variation in house prices and administrative data on new passenger vehicle registrations as a proxy for consumption. We find a robust cross‐sectional relationship, and in our preferred specification estimate an elasticity of new passenger vehicle registrations with respect to gross housing wealth of 0.4–0.5, which based on our preferred calibration implies a marginal propensity to consume for total consumption of less than 0.5 cents. Notably, we find evidence that the relationship between house prices and new vehicle registrations is heterogeneous in income.