Hybrid seminar: Households’ heterogeneous welfare effects of using home equity for life cycle consumption smoothing
On Tuesday May 31st 2022, Jim Been (Leiden University) will give an online presentation titled: "Households’ heterogeneous welfare effects of using home equity for life cycle consumption smoothing." To attend this seminar, please send an e-mail to Simone Pailer (S.Pailer@cpb.nl). You will be registered at the reception or will receive a Webex-invitation via Outlook.
Using a life-cycle model and a representative sample of Dutch households, we analyze the extent to which using home equity leads to (heterogeneity in) welfare gains over the life cycle. The most policy-feasible option to borrow against 50% of home equity over the life cycle leads to median (average) welfare gains of 7% (11%). However, we find substantial heterogeneity with half of the households facing a welfare gain between 3% and 13%. Much of this heterogeneity is explained by heterogeneity in households’ income and (housing) wealth and less so by heterogeneity in their demographics or preferences for consumption smoothing and time.