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Do House Prices Affect Consumption? A Re‐assessment of the Wealth Hypothesis
Author(s) -
Cristini Annalisa,
Sevilla Almudena
Publication year - 2014
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/ecca.12098
Subject(s) - economics , consumption (sociology) , house price , affect (linguistics) , contrast (vision) , monetary economics , microeconomics , public economics , psychology , sociology , social science , communication , artificial intelligence , computer science
This paper revives the debate in the literature about the relationship between house prices and consumption by exploring conflicting results in the UK. Campbell and Cocco ([Campbell, J. Y., 2007]) find that old owners benefit most from a house price increase and young renters least, confirming the so‐called wealth hypothesis. In contrast, Attanasio et al . ([Attanasio, O. P., 2009]) find that house prices have the same impact on consumption across age groups. We rule out several potential explanations related to data construction, and provide evidence that the functional form can reconcile the conflicting results in the two papers.