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Title: Household Risks and the Demand for Housing Commitments

Citation Type: Miscellaneous

Publication Year: 2004

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Abstract: A standard model of precautionary saving predicts that increasing risk leads to increased saving and decreased consumption. This paper will argue that the impact of risk can be complicated by the commitment feature of some forms of consumption, the fact that adjusting the quantityof consumption can be costly.In particular, we present cleanly identified variation in a major risk -unemployment -for which commitment inverts the standard precautionary saving result. Couples who share an occupation face increased risk as their unemployment shocks are more highly correlated. These couples spend more on housing than other couples. We exploit variation in moving costs and unemployment insurance generosity to show thatthese results are consistent with a theory of consumption commitments and do not reflect unobservable differences between couples.

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Authors: Sinai, Todd; Shore, Stephen H.

Publisher: University of Pennsylvania, Wharton School

Data Collections: IPUMS USA

Topics: Housing and Segregation, Other

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