Homeownership, Polarization and Inequality
Abstract/Contents
- Abstract
- In recent decades, the U.S. labor market has become more unequal and polarized: wage differences have widened and middle-income jobs have been replaced by low and high-income jobs. The rise in inequality and polarization have been more pronounced in large cities. I argue that this can be explained by higher house price growth in big cities, which makes it harder for middle-income households to buy a house there. I build a spatial equilibrium model in which households differ by skill, and choose where to live and whether to rent or own housing. Low-skilled households cannot afford to buy in any location, while the high-skilled can buy anywhere. Meanwhile, the middle-skilled can only buy a house in affordable places. Thus, the middle of the skill distribution in expensive locations empties out, making them more polarized and unequal. Empirical evidence supports these predictions. First, middle-income households are more likely to move to states with lower house prices for housing-related reasons than those with low or high income. Second, polarization and inequality grew more in commuting zones where prices increased the most. Counterfactual experiments show that rising price-wage and price-rent ratios account for 12% to 21% of the increase in low and high-paid jobs and for 7% to 10% of the growth in the variance of log wages in the 20 largest commuting zones since 1980.
Description
| Type of resource | text |
|---|---|
| Date created | September 10, 2021 |
Creators/Contributors
| Author | Parkhomenko, Andrii |
|---|---|
| Organizer of meeting | Diamond, Rebecca |
| Organizer of meeting | van Dijk, Winnie |
| Organizer of meeting | Schneider, Martin |
| Organizer of meeting | Tsivanidis, Nick |
Subjects
| Subject | homeownership |
|---|---|
| Subject | labor market polarization |
| Subject | income inequality |
| Subject | spatial equilibrium |
| Subject | house prices |
| Genre | Text |
| Genre | Working paper |
| Genre | Grey literature |
Bibliographic information
Access conditions
- Use and reproduction
- User agrees that, where applicable, content will not be used to identify or to otherwise infringe the privacy or confidentiality rights of individuals. Content distributed via the Stanford Digital Repository may be subject to additional license and use restrictions applied by the depositor.
- License
- This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).
Preferred citation
- Preferred citation
- Parkhomenko, A. (2022). Homeownership, Polarization and Inequality. Stanford Digital Repository. Available at https://purl.stanford.edu/hs463fj0113
Collection
SITE Conference 2021
View other items in this collection in SearchWorksContact information
- Contact
- siteworkshop@stanford.edu
Also listed in
Loading usage metrics...