Housing Price Risk, Home Ownership, and Wealth

Rand Corporation, Santa Monica CA

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Abstract

In this extension to my R-37, we will have several objectives. First, we will use the opportunity ofthe financial crisis to estimate the effects on capital gains and mostly losses of various asset prices and employment changes on a variety of non-health outcomes in England and the United States. These outcomes will include employment, consumption (and its major sub-components), savings, and intended bequests. Second, we will extend our analysis to an important set of health outcomes. These health outcomes will include not only changes in physical health including mortality and disability, but also mental health including depression, psycho-social health, overall well-being, and life satisfaction. The impact of wealth increases during booms on physical and mental health may be small compared to their potential impact during severe busts. Our third specific aim will be to model and understand the impacts ofthe relatively flat English housing consumption profiles at older ages on total consumption, total non-housing consumption, and other forms of consumption at older ages. In this analysis, we will incorporate the very distinct profiles of out-of pocket medical expenses in the two countries. The final specific aim will continue to extend this analysis to a wider array of countries. This will involve continuing our work in China. In addition, the availability of multiple waves (at least four) of SHARE data on nineteen European countries with comparable measured data to that of HRS and ELSA allows us to extend our analysis to most of continental Europe.