Intergenerational Wealth Effects of House Price Changes
Speaker: Dr James Graham
Affiliation: The University of Sydney
Location: Room S302, Social Science Building (#24), UQ St Lucia campus
Abstract
Fluctuations in house prices are known to affect household consumption through wealth and collateral channels. We argue that house price movements can also have long-lasting intergenerational wealth effects through changes in local school quality. In a simple household model with local schools and neighborhood choice, we show that when rising house prices improve local school quality the marginal cost of educational investment declines. Parents face a tradeoff between selling their homes to realize the capital gain on housing and remaining in their current neighbourhood to provide higher quality schooling to their children. We then use detailed micro-data from school zones within a large US school district to study the relationship between house prices, school quality, and neighborhood choice. We show, first, that rising house prices are indeed associated with rising school quality and, second, that parents are less likely to leave a neighborhood following a house price increase than non-parents. Finally, we study a heterogeneous agent life-cycle model in spatial equilibrium. We find that local house price shocks increase intergenerational income inequality by improving the outcomes of children growing up in the area to the detriment of children in other neighborhoods.
About the presenter's meeting
Dr James Graham will be visiting the School of Economics on Wednesday 13th July 2022. While here, he will be using room 520A Colin Clark Building. If you would like to meet with Dr Graham please contact Dr Satoshi Tanaka who will be his host while at The University of Queensland.
About School Seminar Series
The School of Economics General Seminar Series is held on Fridays. These are in-person and presented by a range of guest researchers from around Australia and internationally.