The Wealth Distribution with Durable Goods Articles uri icon

publication date

  • February 2010

start page

  • 143

end page

  • 170

issue

  • 1

volume

  • 51

International Standard Serial Number (ISSN)

  • 0020-6598

Electronic International Standard Serial Number (EISSN)

  • 1468-2354

abstract

  • In the United States, the distribution of houses is less egalitarian than that of earnings for the total population, but these two distributions are remarkably similar for homeowners. Additionally,
    housing as a fraction of total wealth decreases with the level of
    wealth. In order to understand the different factors that account for
    these wealth composition patterns, we introduce illiquid houses and
    collateral credit in a general equilibrium model of heterogeneous agents
    with idiosyncratic uncertainty. A combination of very persistent shocks
    to earnings, frictions in the housing market, and a rental market is
    necessary to obtain numbers in line with the evidence.