DP14935 Rent or Buy? The Role of Lifetime Experiences on Homeownership within and across Countries

Author(s): Ulrike M. Malmendier, Alex Steiny Wellsjo
Publication Date: June 2020
JEL(s): D03, D14, D83, D84, E03, E21, G02, G11, R31
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14935

What explains the vast differences in homeownership rates across and within countries? We argue that individual lifetime exposure to inflation play a significant role in the decision to become homeowner. First, we show that immigrants' country-of-origin inflation experiences predict their homeownership rates in the US. Second, using household data from 20 European countries, we estimate that a one log-point increase in personally experienced inflation predicts a 19pp increase in the average individual's likelihood of homeownership. The relationship between homeownership and experienced inflation is robust to other determinants of homeownership as well as any differences across countries and over time.