Immigration, Real Estate Prices and the Consumption Decision of Native Households

Item Type Conference or Workshop Item (Paper)
Abstract

Since house prices govern the consumption decisions of renters and owners alike, changing house prices can have far-reaching macroeconomic consequences. We analyze how the disposable income and consumption decisions of households are affected by exogenous house price changes in Switzerland. We look at consumption of both housing and nondurable goods to establish a comprehensive picture. We ensure that our house price variation is exogenous by instrumenting house prices with origin-shift immigration. Our unique dataset includes information on every immigrant that entered Switzerland between 1990 and 2013, house price data for every community, and detailed survey data for over 5000 households. We can show three things. Firstly, different types of immigrants influence house prices to different degrees. This finding allows us to structure a valid instrument while also contributing to an ongoing European discussion over the effects of immigration. Secondly, rising house prices reduce the disposable income of renters. This is particularly pronounced for renters who are forced to relocate in times of rising prices. We find, therefore, that renters consume less while owners do not necessarily consume more. This is different from the US/UK context and may reflect the inability of households to extract home equity in central Europe. Thirdly, households transition to ownership less frequently or move away more often following an exogenous price increase. We add novel insights on household consumption and tenure-/location choice in response to exogenous changes in the cost of housing.

Authors Blickle, Kristian & Adams, Zeno
Language English
Subjects business studies
economics
finance
HSG Classification contribution to scientific community
Date 2016
Event Title Research in Behavioral Finance Conference 2016
Event Location Vrije Universiteit Amsterdam
Event Dates 15.-16.09.2016
Contact Email Address kristian.blickle@unisg.ch
Depositing User Beatrix Kobelt-Glock
Date Deposited 20 Sep 2016 13:28
Last Modified 05 Oct 2018 08:01
URI: https://www.alexandria.unisg.ch/publications/249269

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Citation

Blickle, Kristian & Adams, Zeno: Immigration, Real Estate Prices and the Consumption Decision of Native Households. 2016. - Research in Behavioral Finance Conference 2016. - Vrije Universiteit Amsterdam.

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https://www.alexandria.unisg.ch/id/eprint/249269
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