Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/64777
Authors: 
Blow, Laura
Nesheim, Lars
Year of Publication: 
2009
Series/Report no.: 
cemmap working paper CWP03/09
Abstract: 
How do house price changes affect the cost of living? The retail price index in the UK does not directly incorporate house price changes. Instead it uses mortgage interest to capture the cost of owning a home. This is a useful method from many perspectives. However, from a consumer welfare perspective, while mortgage interest does capture the cost of a particular service, it does not capture the cost of housing services. The shadow price of housing captures the welfare cost to a household of changes in housing prices. In this paper we create a new shadow price index using RPI data and the shadow price of housing and investigate how replacing the mortgage interest with the shadow price of housing affects measures of the cost of living.
Subjects: 
housing
retail price index
shadow price
user cost
JEL: 
C43
E31
R21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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