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On the User Cost and Home Ownership

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorDíaz, Antoniaes
dc.contributor.authorLuengo Prado, María Josées
dc.date.accessioned2014-05-23T12:01:14Z
dc.date.available2014-05-23T12:01:14Z
dc.date.issued2008-07es
dc.description.abstractThis paper studies the differences in the cost of housing services for renters and homeowners and calculates the bias that results when we value owner-occupied housing services using a rental equivalence approach. Our framework is a life-cycle model with endogenous tenure choice with households facing idiosyncratic uninsurable earnings risk and housing price risk. We model houses as illiquid assets that provide collateral for loans. To analyze the impact of preferential housing taxation on the tenure choice and the bias, we consider a tax system that mimics that of the US economy. Namely, owner-occupied housing services are not taxed and mortgage interest payments are deductible. Through simulations, we show that a rental equivalence approach (relative to a user cost approach) overestimates the cost of housing services. The magnitude of the bias is very sensitive to both the income tax rate and the size of adjustment costs in the housing market.en
dc.description.statusPublicadoes
dc.format.mimetypeapplication/pdf
dc.identifier.bibliographicCitationReview of Economic Dynamics. (2008), 11 (3), p. 584-613en
dc.identifier.doi10.1016/j.red.2007.12.002
dc.identifier.issn1094-2025
dc.identifier.publicationfirstpage584
dc.identifier.publicationissue3
dc.identifier.publicationlastpage613
dc.identifier.publicationtitleReview of Economic Dynamicsen
dc.identifier.publicationvolume11
dc.identifier.urihttps://hdl.handle.net/10016/4937
dc.language.isoengen
dc.publisherElsevieren
dc.relation.publisherversionhttp://dx.doi.org/10.1016/j.red.2007.12.002en
dc.rights© 2007 Elsevier Inc.en
dc.rights.accessRightsopen accessen
dc.subject.ecienciaEconomíaes
dc.subject.otherConsumptionen
dc.subject.otherDurablesen
dc.subject.otherDown paymentsen
dc.subject.otherHousingen
dc.subject.otherUser costen
dc.titleOn the User Cost and Home Ownershipen
dc.typeresearch article*
dc.type.hasVersionAM*
dc.type.reviewPeerRevieweden
dspace.entity.typePublication
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