Sveriges Riksbank Working Paper Series 272 Housing Choices and Labor Income Risk Housing Choices and Labor Income Risk

The Working Paper series presents reports on matters in the sphere of activities of the Riksbank that are considered to be of interest to a wider public. The papers are to be regarded as reports on ongoing studies and the authors will be pleased to receive comments. The views expressed in Working Papers are solely the responsibility of the authors and should not to be interpreted as reflecting the views of the Executive Board of Sveriges Riksbank. Abstract I show that individuals whose unemployment risk tends to increase more when local home prices fall optimally invest less in owner-occupied housing. Using a unique, Swedish register-based database, I …nd that a one standard deviation increase in the covariance between individually estimated unemployment risks and local home prices implies an average increase in the value of households' investments in owner-occupied housing of USD 13,300. Further, I …nd, in line with the predictions of my theoretical model, that same-industry couples rent more often, but, conditional on ownership, invest USD 9,200 more on average in single-family homes than di¤erent-industry couples. Riksbank for their many helpful comments. All errors, however, are mine. The views expressed in this paper are solely the responsibility of the author and should not be interpreted as re ‡ecting the views of the Executive Board of Sveriges Riksbank.

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