The Housing Cost Disease

53 Pages Posted: 11 Aug 2015

See all articles by Nicola Borri

Nicola Borri

LUISS University - Department of Economics and Finance

Pietro Reichlin

Luiss Guido Carli University - Department of Economics and Finance; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

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

Borri, Nicola and Reichlin, Pietro, The Housing Cost Disease (August 2015). CEPR Discussion Paper No. DP10756, Available at SSRN: https://ssrn.com/abstract=2642221

Nicola Borri (Contact Author)

LUISS University - Department of Economics and Finance ( email )

viale Romania, 32
Rome, 00197
Italy

HOME PAGE: http://docenti.luiss.it/borri/

Pietro Reichlin

Luiss Guido Carli University - Department of Economics and Finance ( email )

Viale Romania, 32
Rome, 00197
Italy
390685225554 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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