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Marko Terviö, Aalto University Print
Tuesday, 26 October 2010, 14:00 - 15:15

Income Distribution and Housing Prices: An Assignment Model Approach

Marko Terviö, Aalto University

Abstract: We present a framework for studying the relation between the distribution of income and the distribution of housing prices that is based on an assignment model of households with heterogeneous incomes and houses of heterogeneous quality. The equilibrium distribution of prices depends on both distributions in a tractable but nontrivial manner. We infer the unobserved distribution of quality from the joint distribution of income and housing prices, and use it to generate counterfactual price distributions under counterfactual income distributions. We apply the model to estimate the impact of recently increased income inequality on the distribution of house prices in 6 US metropolitan regions. We find that the recent increase in income inequality had a negative impact on average house prices. The impact of uneven income growth has been positive only within the top decile.

Location: R42.2.103
Contact: Claude Adan, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it