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Housing Wealth and Consumption: A Micro Panel Study


  • We thank the editor and three referees for very helpful suggestions. We also thank John Duca, Kristin J. Kleinjans, Nicolai Kristensen and participants at conferences and seminars in Cambridge, Frankfurt, Copenhagen, Nyborg, Lund and Oxford for comments and suggestions. Support from The Danish Council for Independent Research, Social Sciences, is gratefully acknowledged.


There is strong evidence that house prices and consumption are synchronised. There is, however, disagreement over the causes of this link. This study examines if there is a wealth effect of house prices on consumption. Using a household-level panel data set with information about house ownership, income, wealth and demographics for a large sample of the Danish population in the period 1987–96, we model the dependence of the growth rate of total household expenditure with unanticipated innovations to house prices. Controlling for factors related to competing explanations, we find little evidence of a housing wealth effect.