Full Citation

Title: Do Rising Tides Lift All Prices? Income Inequality and Housing Affordability

Citation Type: Working Paper

Publication Year: 2006

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ISSN:

DOI: 10.3386/w12331

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Abstract: Simple partial-equilibrium models suggest that income increases at the high end of the distribution can raise price paid by those at the low end of the income distribution. This prediction does not universally hold in a general equilibrium model, or in models where the rich and poor consume distinct products. We use Census microdata to evaluate these predictions empirically, using data on housing markets in American metropolitan areas between 1970 and 2000. Evidence clearly and unsurprisingly shows that decreases in one's own income lead to less housing consumption and less income left over after paying for housing. The effect of increases in others' income, holding one's own income constant, is more nuanced. In tight housing markets, the poor do worse when the rich get richer. In slack markets, at least some evidence suggests that increases in others' income, holding own income constant, may be beneficial.

Url: http://www.nber.org/papers/w12331.pdf

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Authors: Matlack, Janna L; Vigdor, Jacob L

Series Title:

Publication Number: 12331

Institution: National Bureau of Economic Research

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Publisher Location: Cambridge, MA

Data Collections: IPUMS USA

Topics: Housing and Segregation, Labor Force and Occupational Structure, Poverty and Welfare

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