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Title:Using home maintenance and repairs to smooth variable earnings PDF Logo
Authors:Gyourko, Joseph
Tracy, Joseph
Issue Date:2003
Series/Report no.:Staff Report, Federal Reserve Bank of New York 168
Abstract:Recent research indicates that the marked increase in U.S. income inequality over the last twenty-five years has not been matched by a similar increase in consumption inequality. This paper examines the role of saving/dissaving in a house as a vehicle for consumption smoothing. Data from the American Housing Survey show that expenditures on home maintenance and repairs are economically significant, amounting to roughly $1,750 per household each year. This figure is comparable to the labor literature estimates that put households' average annual transitory income variance at about $2,200. Our calculations show a significant elasticity of maintenance and repair expenditures to transitory income shocks. The elasticities are higher for less well educated households, which are more likely to be liquidity constrained than their better educated counterparts.
JEL:D12
E21
R21
Document Type:Working Paper
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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