Renting versus Owning and the Role of Income Risk: The Case of Germany

    Research output: Working paperDiscussion paper


    In a world with complete markets and no transactions cost, the decision
    whether to rent or buy a home is separate from a household's professional
    income risk. If markets are incomplete and have frictions, however, profession-
    speci¯c income risk, regional house price risk, and mobility needs will interact
    and should a®ect the tenure mode choice. Using panel data fromWest Germany,
    we establish homogeneous profession groups and estimate their regional net
    income risk and regional mobility. We then examine the impact of the risk
    and mobility variables on the tenure mode decision at the aggregate and the
    individual household level. We ¯nd that the diversi¯cation potential of renting
    a®ects the tenure mode choice as do mobility needs.
    Original languageEnglish
    Place of PublicationBerlin
    PublisherHumboldt-Universität zu Berlin
    Number of pages54
    Publication statusPublished - Nov 2009

    Publication series

    NameSFB 649 Discussion paper
    ISSN (Print)1860-5664


    • tenure mode choice
    • background risk
    • household mobility


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