Abstract
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.
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 language | English |
|---|---|
| Place of Publication | Berlin |
| Publisher | Humboldt-Universität zu Berlin |
| Number of pages | 54 |
| Publication status | Published - Nov 2009 |
Publication series
| Name | SFB 649 Discussion paper |
|---|---|
| No. | 2009-060 |
| ISSN (Print) | 1860-5664 |
Keywords
- tenure mode choice
- background risk
- household mobility