published as 'Labor income uncertainty, skewness and homeownership: A panel data study for Germany and Spain ' in: Journal of Urban Economics, 2005, 58 (1), 156-176
In this paper we investigate the effect of labour income uncertainty on the probability of homeownership in Germany and Spain. This study is motivated by two facts. Firstly, theoretical models tend to provide ambiguous results in this issue. Secondly, there is limited previous empirical evidence and the existing focuses exclusively on the US housing market. We claim that more international evidence is necessary in order to disentangle this puzzle. We develop a simple theoretical formula that highlights the pivotal role of risk attitudes in the housing tenure decisions that also allow us to introduce the concept of "skewness affection" as a relevant phenomenon. To carry out this test we propose an income uncertainty measure based on panel data labour income equations. We observe that households facing increasing income uncertainty display preference for renting while those located in a positively skewed income distribution show a greater propensity for homeownership. Income uncertainty analysis in housing decisions has important implications for the design of public housing policies and also for the design of private mortgage insurance products.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.