17. januar 2022

The Intergenerational Transmission of Housing Wealth

Wealth inequality

Meltem Daysal and co-authors have investigated how plausibly exogenous shocks to wealth are transmitted to children later in life as well as the potential mechanisms behind this transmission.

The study was presented at American Economic Association Annual Meeting, ASSA on Saturday 8th of January and you can watch the entire presentation as webcast.

The study's focus is on housing wealth shocks because housing wealth is the single most important component of wealth for all but highest-resource households.

In their abstract Meltem and her co-authors explain:

"We use Danish register data on children born between 1984 and 1989 to parents who owned a home at the time of birth and fix each child’s house as the house at birth. Our identification strategy links house-specific variation in prices when children are of different ages (0-5, 6-11, and 12-17) to their housing wealth during their early- to mid-30s.

Our models include a rich set of controls that account for the possibility that otherwise wealthier households experience larger home price growth, including municipality-by-year fixed effects, baseline home prices, and parental income, education, and non-housing wealth. The rich data we use also allow us to explore the mechanisms underlying this transmission.

We examine how housing price changes during childhood affect educational attainment, the types of degrees individuals earn, occupation, marriage and fertility decisions, labor market earnings, debt, and the accumulation of non-housing and non-retirement wealth in early adulthood.

Our results provide new insights into how housing markets facilitate the transmission of wealth across generations, the mechanisms that determine this transmission, and the role of housing wealth in driving the rising wealth inequality across households."