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Do House Prices Affect Consumption? A Re-assessment of the Wealth Hypothesis



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 (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. (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.