Households' heterogeneous welfare effects of using home equity for life cycle consumption
Been,Jim van Ewijk,Casper Knoef,Marike Mehlkopf,Roel Muns,Sander
Been,Jim
van Ewijk,Casper
Knoef,Marike
Mehlkopf,Roel
Muns,Sander
Abstract
Using a life-cycle model and a representative sample of households, we analyze the extent to which using home equity leads to (heterogeneity in) welfare gains over the life cycle. The most policy-feasible option to borrow against 50% of home equity over the life cycle leads to median (average) welfare gains of 7% (11%). However, we find substantial heterogeneity with half of the households facing a welfare gain between 3% and 13%. Much of this heterogeneity is explained by heterogeneity in households’ income and (housing) wealth and less so by heterogeneity in their demographics or preferences for consumption smoothing and time.
Description
Publisher Copyright: © 2023 The Author(s)
Date
2024-02
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
Heterogeneity, Housing wealth, Life cycle model, Welfare effects, D14 - Household Saving; Personal Finance, D15 - Intertemporal Household Choice; Life Cycle Models and Saving, D61 - Allocative Efficiency ; Cost–Benefit Analysis, E21 - Consumption ; Saving ; Wealth, H55 - Social Security and Public Pensions, J32 - Nonwage Labor Costs and Benefits ; Retirement Plans ; Private Pensions
Citation
Been, J, van Ewijk, C, Knoef, M, Mehlkopf, R & Muns, S 2024, 'Households' heterogeneous welfare effects of using home equity for life cycle consumption', Journal of the Economics of Ageing, vol. 27, 100499. https://doi.org/10.1016/j.jeoa.2023.100499
License
info:eu-repo/semantics/openAccess