Browsing by Subject "R13"

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  • Haavio, Markus; Kauppi, Heikki (2009)
    Bank of Finland Research Discussion Papers 14/2009
    Empirical evidence suggests that local jurisdictions are internally more heterogeneous than standard sorting models predict. We develop a dynamic multiregion model, with fluctuating regional house prices, where an owner-occupying household's location choice depends on its current wealth and its current 'match' and involves both consumption and investment considerations. The relative weights of the consumption and investment motives in the location choice determine the equilibrium pattern of residential sorting, with a strong investment (consumption) motive implying sorting according to match (wealth). The model predicts a negative relation between size of house price fluctuations and residential sorting in the match dimension. Also movers should be more sorted than stayers. These predictions are consistent with evidence from US metropolitan areas when income, age and education are used as proxies for the match. Keywords: residential sorting, house prices, incomplete markets, owneroccupation, household mobility JEL classification numbers: D31, D52, R13, R21, R23
  • Haavio, Markus; Kauppi, Heikki (2011)
    Bank of Finland Research Discussion Papers 24/2011
    We develop a dynamic multi-region model, with fluctuating regional house prices, where an owner-occupied household´s location choice depends on its current wealth and its current type and involves both consumption and investment considerations. The relative strength of the consumption motive and the investment motive in the location choice determines the equilibrium pattern of residential sorting, with a strong investment (consumption) motive implying sorting according to the type (wealth). The model predicts a negative relation between the size of house price fluctuations and the degree of residential sorting in the type dimension. Also, movers should be more sorted than stayers in the type dimension. These predictions are consistent with evidence from US metropolitan areas when income, education and age are used as proxies for household type. Keywords: Residential sorting, House prices, Consumption motive, Investment motive, Incomplete markets, Household mobility JEL Classification: D52, G11, R13, R21, R23