Gary V. Engelhardt

House Prices and Home Owner Saving Behavior

This paper examines the empirical link between house price appreciation and the savings behavior of home owners during the 1980s. The analysis uses household asset and debt data for a sample of under age sixty-five home owning households from the 1984 and 1989 waves of the PSID to construct changes in real household wealth as a measure of household saving behavior. Cross-time and cross-regional variation in housing market conditions are used to identify behavior savings effects. The empirical analysis suggests that the estimated marginal propensity to consume out of real housing capital gains is 0.03 for the median saver household. However, there is an asymmetry in the saving response to both total and unanticipated real housing capital gains. All of the savings offset comes from households that experience real housing capital losses. Households that experience real gains do not change their saving behavior. The existence of this asymmetry casts doubt on the power of changes in house prices to explain the time series path of saving in the U.S.

Nominal Loss Aversion, Housing Equity Constraints, and Household Mobility: Evidence from the United States

This paper exploits the significant recent variation in United States house prices to empirically examine the effect on housing equity constraints and nominal loss aversion on household mobility. The analysis uses unique, detailed data from 1985-1996 on household characteristics, mobility, and wealth from the National Longitudinal Survey of Youth (NLSY79) matched with house price data from 149 metropolitan areas to estimate semiparametric proportional hazard models of intra- and inter-metropolitan mobility. There are five principal findings: (1) household intra-metropolitan own-to-own mobility responds differently to nominal housing losses than to gains; (2) nominal loss aversion is significantly less pronounced in intra-metropolitan own-to-rent and inter-metropolitan mobility, respectively; (3) there is some evidence of binding equity constraints in intra-metropolitan own-to-own mobility; (4) there is little evidence that low equity constrains intra-metropolitan own-to-rent and inter-metropolitan mobility, respectively; (5) a comparison of the estimated effects indicates that nominal loss aversion has a more dominant effect than equity constraints in restricting household mobility, roughly two and one-half to three times the impact of equity constraints.

House prices and demographic change: Canadian evidence

Abstract We examine the links between demography-induced changes in housing demand and real house prices using postwar data for Canada. Although Canadian demographic patterns are very similar to those in the United States, real house prices exhibit a substantially different trajectory: they rise in the early 1970s, and then fall nearly forty per cent between 1975 and the mid-1980s. We estimate simple time-series models relating house prices to demographic factors, and unlike previous estimates for the U.S. by Mankiw and Weil (1989), we find a statistically insignificant and in most cases negative association between demographic demand and house prices. These results suggest caution in extrapolating historical U.S. trends to the next century, while also illustrating that substantial real declines in house values are not impossible.

Social Security and Elderly Living Arrangements

Previous studies of the effect of Social Security on elderly living arrangements generally have relied on data from the distant past or differences in benefits across families or cohorts that potentially were correlated with other determinants of living arrangements. Using data from the 1980–99 Current Population Surveys, we attempt to isolate the causal effect of Social Security on living arrangements with an instrumental-variable approach that relies on the large shifts in benefits for cohorts born from 1910–21, the so-called Social Security notch. Over all elderly households, the estimated elasticity of living with others with respect to Social Security income is −0.4, with elasticities of −1.3 and −1.4 for the widowed and divorced, respectively; most of the effects on living arrangements appear to be concentrated among the lesser educated as well. Our estimated elasticities are substantially larger than those from previous studies and suggest that reductions in current benefits would alter living arrangements significantly.

Tax Subsidies and Household Saving: Evidence from Canada

Targeted tax-based saving incentives can be a powerful tool for promoting household and national saving. This study examines the effect of the cancellation of the Registered Home Ownership Savings Plan (RHOSP), a Canadian tax-subsidized saving program, on household saving. The cancellation provides exogenous variation in eligibility for the subsidy that is uncorrelated with householdspecific heterogeneity in saving behavior. The empirical analysis suggests that the subsidy had a substantial impact on saving: each dollar contributed to the program represented 56-93 and 20-57 cents of new household and national saving, respectively.

Measurement Error in Earnings Data in the Health and Retirement Study

We provide new evidence on the extent of measurement error in respondent-reported earnings data by exploiting detailed W-2 records matched to older workers in the Health and Retirement Study (HRS). Our empirical findings are qualitatively consistent with the findings of previous studies. Mean measurement error in the 1991 HRS earnings data for men is somewhat larger than what has been found in other validation studies, but is still modest, averaging about 0.059 log points, approximately 5.9 percent, or

Reasons for job change and the disposition of pre-retirement lump-sum pension distributions

1,500. For women in 1991, it is 0.067 log points, approximately 6.7 percent, or

The Pension Protection Act of 2006 and Diversification of Employer Stock in Defined Contribution Plans

916. We find a negative correlation between the measurement error and the true value of earnings as measured by the W-2 records, which indicates the presence of non-classical measurement error. For men and women, this error shows little correlation with a standard set of cross-sectional earnings determinants. The one exception is that the measurement error rises with reported education. The bias on the OLS parameter estimate of the impact of having a college degree or higher (relative to a high school drop-out) from using the respondent-reported rather than the W-2 earnings is positive and estimated to be 0.071 log points, or roughly a bias of 7 percent.

Educational Saving Incentives for Low-Income Families: Experimental Evidence from the Michigan SEED Program

Abstract Estimates from logit models on a sample of 890 individuals from the 1992 Health and Retirement Study (HRS) eligible to receive a pre-retirement lump-sum pension distribution suggest that pension assets may have been used to buffer economic shocks upon job change.

The Impact of Employment on Parental Coresidence

This paper estimates the short-run impact of the Pension Protection Act of 2006 (PPA2006) on holdings of employer stock in defined contribution pension plans. PPA2006 allowed participants in plans with employer stock to diversify their holdings. However, stand-alone ESOPs, i.e., those that do not allow employee elective deferrals or after-tax contributions, were exempt from this provision. Using detailed Form 5500 financial data for stand-alone ESOPs and those that allow employee elective deferrals or after-tax contributions, so-called KSOPs, from 2003-5 (before) and 2007-9 (after) the PPA and a quasi-experimental empirical framework, two primary empirical findings emerge. First, the share of plan assets in company stock fell 7 percentage points for KSOPs, because of the diversification provisions in PPA2006, a substantial decline. There was no change in holdings for stand-alone ESOPs. Second, most of the decline occurred in plans that had between 25-50 percent of plan assets in employer stock. Nonetheless, in 2009 still two-thirds of KSOPs had more than 10 percent of assets in company stock, the statutory limit for defined benefit pension plans.