Housing Habits and Their Implications for Life-cycle Consumption and Investment

Holger Kraft, Claus Munk, Sebastian Wagner

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review


We solve a rich life-cycle model of household decisions involving consumption of perishable goods and housing services, habit formation for housing consumption, stochastic labor income, stochastic house prices, home renting and owning, stock investments, and portfolio constraints. In line with empirical observations, the optimal decisions involve (i) stock investments that are low or zero for many young agents and then gradually increasing over life, (ii) an age- and wealth-dependent housing expenditure share, (iii) non-housing consumption being significantly more sensitive to wealth and income shocks than housing consumption, and (iv) non-housing consumption being hump-shaped over life.
TidsskriftReview of Finance
Udgave nummer5
Sider (fra-til)1737-1762
Antal sider26
StatusUdgivet - aug. 2018

Bibliografisk note

Published online: 13. October 2017


  • Household decisions
  • Stock investments
  • Housing expenditure share
  • Consumption hump
  • Habit formation