The Housing Cost Disease
53 Pages Posted: 11 Aug 2015
There are 2 versions of this paper
The Housing Cost Disease
Date Written: August 2015
Abstract
We use a simple two-sector, life-cycle economy with bequests to explain the increasing wealth to income ratio, housing wealth and wealth inequality that have been observed in several countries over the long-run as a consequence of a rising labor efficiency in manufacturing (housing cost disease). When consumption inequality across households is sufficiently large, the housing cost disease has adverse effects on a measure of social welfare based on an egalitarian principle: the higher the housing's value appreciation, the lower the welfare benefit of a rising labor efficiency in manufacturing.
Keywords: Capital, Housing, Productivity, Wealth, Wealth Inequality
JEL Classification: D9, E2, O4
Suggested Citation: Suggested Citation