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.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Evans et al. (2003), for example, explain how more autonomy goes hand in hand with homeownership.
- 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.
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.
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.
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.
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.
References
Alessie, R., & Lusardi, A. (1997). Consumption, saving and habit formation. Economics Letters, 55(1), 103–108.
Angelini, V., Laferrère, A., & Weber, G. (2013). Home-ownership in Europe: How did it happen? Advances in Life Course Research, 18(1), 83–90.
Becker, G. (1974). A theory of social interactions. The Journal of Political Economy, 82(6), 1063–1093.
Bricker, J., Kennickell, A. B., Moore, K. B., & Sabelhaus, J. (2012). Changes in U.S. family finances from 2007 to 2010: Evidence from the Survey of Consumer Finances. Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue June.
Brown, S., & Gray, D. (2016). Household finances and well-being in Australia: An empirical analysis of comparison effects. Journal of Economic Psychology, 53, 17–36.
Brown, S., & Taylor, K. B. (2016). Early influences on saving behaviour: Analysis of British panel data. Journal of Banking and Finance, 62, 1–14.
Chetty, R., Sándor, L., & Szeidl, A. (2017). The effect of housing on portfolio choice. Journal of Finance, 72(3), 1171–1212.
Coda Moscarola, F., Fornero, E., & Rossi, M. (2012). Parents/children “deals”: Inter-vivos transfers and living proximity. CeRP WP N. 95/10. Retrieved from http://www.cerp.carloalberto.org/parentschildren-deals-inter-vivos-transfers-and-living-proximity-2/.
Damisch, P., Kumar, M., Zakrzewski, A., & Zhinlinskaya, N. (2000). Leveling the playing field: Upgrading the wealth management experience for women. The Boston Consulting Group, July 2010. Retrieved from http://www.bcg.com/documents/file 56704.pdf.
Deaton, A. (1992). Understanding consumption. Cambridge: Cambridge University Press.
Dietz, R. D., & Haurin, D. R. (2003). The social and private micro-level consequences of homeownership. Journal of Urban Economics, 54(3), 401–450.
Dynan, K. E. (2000). Habit formation in consumer preferences: Evidence from panel data. American Economic Review, 90, 391–406.
Evans, G. E., Wells, N. M., & Moch, A. (2003). Housing and mental health: A review of the evidence and a methodological and conceptual critique. Journal of Social Issues, 59, 475–500.
Friedman, M. (1957). A theory of the consumption function. Princeton: Princeton University Press.
Gambardella, D., Rossi, M. C., & Salomone, R. (2018). Social finance as a public policy instrument. CeRP WP 2018/178.
Guariglia, A. (2001). Saving behaviour and earnings uncertainty: Evidence from the British household panel survey. Journal of Population Economics, 14(4), 619634.
Guariglia, A., & Rossi, M. (2002). Habit formation and precautionary saving: Evidence from the British household panel survey. Oxford Economic Papers, 54, 1–19.
Kindermann, F., & Kohls, S. (2017). Rental Markets and wealth inequality across Europe. mimeo.
Kopczuk, W. (2015). What do we know about the evolution of top wealth shares in the United States? Journal of Economic Perspectives, 29(1), 47–66.
Marrella, P. (2014). What now?: A widow’s guide to financial independence.
Mishra, A. K., Uematsu, H., & Powell, R. (2012). Precautionary wealth and income uncertainty: A household-level analysis. Journal of Applied Economics, 15(2), 353–369.
Modigliani, F., & Brumberg, R. (1954). Utility analysis and the consumption function. In Post-Keynesian economics.
Muellbauer, J. (2008). Housing, Credit and Consumer Expenditure. CEPR Discussion Papers 6782, C.E.P.R. Discussion Papers.
Piketty, T. (2014). Capital in the 21st century. Harvard: Harvard University Press.
Romiti, A., & Rossi, M. (2014). Housing wealth decumulation, portfolio composition and financial literacy among European elderly. Carlo Alberto Notebooks 375, Collegio Carlo Alberto.
Rossi, M. C. (2008). Households consumption under the habit formation hypothesis. Evidence from Italian households using the Survey of Household Income and Wealth (SHIW). In Consumers Economics: New Research. NOVA Publisher.
Rossi, M. (2009). Examining the interactions between savings and personal pension plan contributions. Evidence from the BHPS. Oxford Bulletin of Economics and Statistics, 71(2), 253–271.
Rossi, M. C., & Sansone, D. (2017). Precautionary savings and the self-employed, Netspar DP Accepted for publication in Small Business Economics.
Rossi, M. C., & Sierminska, E. (2015). Single again? Saving patterns when widowhood occurs. Luxembourg Institute of Socio-Economic Research (LISER) Working Paper Series, 2015–04.
Rossi, M., & Trucchi, S. (2016). Liquidity constraints and labor supply. European Economic Review, 87, 176–193.
Rossi, M. C., Sansone, D., van Soest, A., & Torricelli, C. (2018). Household preferences for socially responsible investments. Cefim WP 66. Retrieved from http://www.cefin.unimore.it/new/publications/household-preferences-for-socially-responsible-investments/.
Sherraden, M. (1991). Assets and the poor: A new American welfare policy. New York: M. E. Sharpe, Inc.
Sierminska, E. (2012). Wealth in the crisis. Social situation observatory: Income distribution and living conditions, Research note 09/2012, European Commission.
Yaari, M. (1965). Uncertain lifetime, life insurance and the theory of the consumer. Review of Economics Studies, 32, 137–150.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2018 The Author(s)
About this chapter
Cite this chapter
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
Download citation
DOI: https://doi.org/10.1007/978-3-319-92558-5_1
Published:
Publisher Name: Palgrave Pivot, Cham
Print ISBN: 978-3-319-92557-8
Online ISBN: 978-3-319-92558-5
eBook Packages: Economics and FinanceEconomics and Finance (R0)