Full Citation

Title: Household Expenditures, Wages, Rents

Citation Type: Journal Article

Publication Year: 2011

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Abstract: New evidence from the 1980, 1990, and 2000 Decennial Census of Housing indicates that expenditure shares on housing are constant over time and across US metropolitanstatistical areas (MSA). Consistent with this observation, we consider a model in which identical households with CobbDouglas preferences for housing and non-housing consumption choose a location and locations differ with respect to income earned by their residents. The model predicts that the relative price of housing of any two MSAsdisproportionately reflects differences in incomes of those MSAs and is independent of housing supply in each MSA. According to the predictions of our calibrated model, thedispersion of rental prices across low- and high-wage MSAs should be larger than we observe: High-wage MSAs like San Francisco are puzzlingly inexpensive relative to lowwageMSAs like Pittsburgh.

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Authors: Ortalo-Magn, Franois; Davis, Morris A.

Periodical (Full): Review of Economic Dynamics

Issue: 2

Volume: 14

Pages: 248-261

Data Collections: IPUMS USA

Topics: Housing and Segregation, Other

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