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The Engel Curve of Owner-Occupied Housing Consumption

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  • Erling Røed Larsen

Abstract

Housing is a major component of aggregate demand, and understanding how the demand for housing co-varies with income is useful for analysis and policy. While estimating housing consumption for tenants amounts to observing rents, estimating housing consumption for owner-occupiers is challenging because it is not directly observable and interest payments vary with re-paid principals. In order to examine the housing consumption for owner- occupiers, this article combines micro data sets on income and imputed rents for owner- occupiers based on home attributes from a consumer expenditure survey and monthly rents in a rental survey. This allows estimation of an Engel curve of owner-occupied consumption, both parametrically and non-parametrically. Regression results demonstrate that the income share of owner-occupied housing consumption decreases with income, while the Engel elasticity computed at the mean is 0.32 and increasing in income.

Suggested Citation

  • Erling Røed Larsen, 2014. "The Engel Curve of Owner-Occupied Housing Consumption," Journal of Applied Economics, Taylor & Francis Journals, vol. 17(2), pages 325-352, November.
    • Handle: RePEc:taf:recsxx:v:17:y:2014:i:2:p:325-352
    DOI: 10.1016/S1514-0326(14)60015-5
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    Cited by:

    1. Trond Arne Borgersen, 2019. "Social Housing Policy in a Segmented Housing Market: Indirect Effects on Markets and on Individuals," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 8(2), pages 1-21, December.
    2. Fredrik Carlsen & Stefan Leknes, 2022. "For whom are cities good places to live?," Regional Studies, Taylor & Francis Journals, vol. 56(12), pages 2177-2190, December.

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