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Using Threshold Estimation Technique to Measure Housing Wealth Effect in Different Income Levels

Author

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  • Jinwoo Jung

    (Hanyang University Ansan Kyunggi-do)

  • Changha Jin

    (Hanyang University Ansan Kyunggi-do)

Abstract

In this study, we estimate the housing wealth effect of households with different income levels. Since we expect the housing wealth effect to vary based on the different income levels, we use the threshold estimation technique developed in Hansen (1999) instead of imposing an exogenous criterion to divide the sample by income level. This econometric technique is developed for panels with individual-specific fixed effects. Therefore, we apply this econometric method on the findings in the existing literature to estimate the housing wealth effect, while considering the heterogeneity in different income categories. We obtain individual level data from the 2012 to 2016 Korea Household Finance and Welfare Survey (KHFWS) and find statistically significant threshold income levels, thus indicating households show different behaviors based on the threshold income. We provide the groundwork for future research to identify the target group who maximizes their wealth effect, which has housing policy implications.

Suggested Citation

  • Jinwoo Jung & Changha Jin, 2019. "Using Threshold Estimation Technique to Measure Housing Wealth Effect in Different Income Levels," International Real Estate Review, Global Social Science Institute, vol. 22(1), pages 59-81.
    • Handle: RePEc:ire:issued:v:22:n:01:2019:p:59-81
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    References listed on IDEAS

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    More about this item

    Keywords

    Real Estate; Wealth Effect; Threshold Estimation; Income Levels;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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