Full Citation

Title: Housing Decision with Divorce Risk

Citation Type: Working Paper

Publication Year: 2018

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Abstract: We build a realistically calibrated life-cycle model of housing decisions under divorce risk. As observed in the data, our model predicts the recent increase in divorce rates leads to reduced homeownership rates. The event of a divorce negatively affects homeownership, and this effect is long-lasting. The risk of a divorce triggers a precautionary savings motive. However, this motive is weaker when individuals can invest in owner-occupied homes because homeowners' higher savings partially substitute for precautionary savings. When young, the larger asset accumulation due to divorce-risk induced precautionary savings enables households to buy homes earlier, whereas the presence of transaction costs leads to reduced homeownership for middle-aged and older households when divorce risk goes up.

Url: https://mpra.ub.uni-muenchen.de/90090/1/MPRA_paper_90090.pdf

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Authors: Fischer, Marcel; Khorunzhina, Natalia

Series Title: MPRA Paper

Publication Number: 90090

Institution: University of Konstanz

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Data Collections: IPUMS USA

Topics: Housing and Segregation, Other

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