Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212203 
Year of Publication: 
2011
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 24/2011
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We develop a dynamic multi-region model, with fluctuating regional house prices, where an owner-occupied householdĀ“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.
Subjects: 
Residential sorting
House prices
Consumption motive
Investment motive
Incomplete markets
Household mobility
JEL: 
D52
G11
R13
R21
R23
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-783-2
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.