Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/312075 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11565
Publisher: 
CESifo GmbH, Munich
Abstract: 
This paper studies whether the interplay of social comparisons in housing and rising income inequality contributed to the household debt boom in the US between 1980 and 2007. We develop a tractable macroeconomic model with general social comparisons in housing to show that changes in the distribution of income affect aggregate housing demand, aggregate debt and house prices if (and only if) social comparisons are asymmetric. In the empirically relevant case of upward-looking comparisons, rising inequality can rationalize a substantial share of the observed housing and debt boom.
Subjects: 
mortgages
housing boom
social comparisons
consumption networks
external habits
keeping up with the Joneses
JEL: 
D14
D31
E21
E44
E70
R21
Document Type: 
Working Paper
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