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Introduction and Conceptual Framework

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Wealth and Homeownership

Abstract

This chapter introduces the reader to the key variables of our book: wealth and homeownership. We first briefly describe the evolution of assets and homeownership and then provide a conceptual framework within which the decision process of wealth accumulation and homeownership can be examined. This framework will be used as the conceptual background used to interpret asset accumulation decisions.

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Notes

  1. 1.

    Evans et al. (2003), for example, explain how more autonomy goes hand in hand with homeownership.

  2. 2.

    Women are gaining importance in society; now representing the majority of graduate students, women account for around 60% of graduate and undergraduate students (Damisch et al. 2000).

  3. 3.

    Given that the first period budget is A1 = y1 − c1 and the year before the last one is AT − 1 = yT − 1 − cT − 1 + (1 + r)AT − 2; while the terminal budget is 0 = yT − cT + (1 + r)AT − 1, multiplying each equation by (1 + r)T − t, we can sum up all budgets and all wealth levels simplify into the intertemporal budget constraint.

  4. 4.

    Using the Lagrangian function, the problem leads to the first order conditions, which show the optimal consumption evolution, stating the equality of consumption over time.

  5. 5.

    If uncertainty on lifetime length is considered in the framework, the conclusions of the model are not altered as transforming assets into annuities will neutralize life uncertainty (Yaari 1965).

  6. 6.

    Unemployment benefits can partially neutralize the risk of unemployment; however, they have a limited duration. Individuals are inevitably exposed to the risk of becoming unemployed as well as to income variations.

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Authors and Affiliations

  1. Department of Management, School of Management and Economics, University of Torino, Torino, Italy

    Mariacristina Rossi

  2. LISER - Luxembourg Institute of Socio-Economic Research, Esch-Belval, Luxembourg

    Eva M. Sierminska

Authors
  1. Mariacristina Rossi
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  2. Eva M. Sierminska
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Rossi, M., Sierminska, E.M. (2018). Introduction and Conceptual Framework. In: Wealth and Homeownership. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-319-92558-5_1

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