TY  - RPRT
        AU  - Diaz-Serrano, Luis
        TI  - Labour Income Uncertainty, Risk Aversion and Home Ownership
        PY  - 2004/Feb/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 1008
        UR  - https://www.iza.org/publications/dp1008
        AB  - In this paper we investigate the effect of labour income uncertainty on the probability of homeownership in Germany and Spain. This study is motivated by two facts. Firstly, theoretical models tend to provide ambiguous results in this issue. Secondly, there is limited previous empirical evidence and the existing focuses exclusively on the US housing market. We claim that more international evidence is necessary in order to disentangle this puzzle. We develop a simple theoretical formula that highlights the pivotal role of risk attitudes in the housing tenure decisions that also allow us to introduce the concept of "skewness affection" as a relevant phenomenon. To carry out this test we propose an income uncertainty measure based on panel data labour income equations. We observe that households facing increasing income uncertainty display preference for renting while those located in a positively skewed income distribution show a greater propensity for homeownership. Income uncertainty analysis in housing decisions has important implications for the design of public housing policies and also for the design of private mortgage insurance products. 
        KW  - credit constraints
KW  - earnings uncertainty
KW  - risk aversion
KW  - skewness affection
KW  - homeownership
KW  - transitory shocks in income
        ER  -