Mohammad G. Robbani

Housing Complementarity in Consumption

The objective in this paper was to show that housing (either by owning or by renting) plays a complementary role in an individual’s consumption decision. Few papers showed that housing is a substitute instead of a complement. We have shown that housing indeed a complements and consumption of non-durable goods is significantly affected by housing decision no matter whether living place is owned or rented. Owning financial assets such as stock and bonds does not affect consumption significantly which should be the case because very few people would select owning financial assets as a source of regular income. The negative coefficient of bonds confirms the general behavior of consumers that at the time of financial hardship people sell their financial portfolio to smooth non-durable consumption.