Housing Decision with Divorce Risk

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

We build a life‐cycle model of housing decisions under divorce risk that predicts that the recent increase in divorce rates leads to reduced homeownership rates. The risk of a divorce triggers a precautionary‐savings motive. However, this motive is weaker when individuals can invest in owner‐occupied homes because homeowners' higher savings partially substitute for precautionary savings. When young, the larger asset accumulation due to divorce‐risk‐induced precautionary savings enables households to buy homes earlier, whereas the presence of transaction costs leads to reduced homeownership for middle‐aged and older households when divorce risk goes up.
Original languageEnglish
JournalInternational Economic Review
Volume60
Issue number3
Pages (from-to)1263-1290
Number of pages28
ISSN0020-6598
DOIs
Publication statusPublished - Aug 2019

Cite this

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Housing Decision with Divorce Risk. / Fischer, Marcel; Khorunzhina, Natalia.

In: International Economic Review, Vol. 60, No. 3, 08.2019, p. 1263-1290.

Research output: Contribution to journalJournal articleResearchpeer-review

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