Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 1998:19: The Relation between Financial and Housing Wealth of Dutch Households

Stefan Hochguertel and Arthur van Soest
Additional contact information
Stefan Hochguertel: Convento di San Domenico, Postal: European University Institute, Via dei Roccetini 9, I-50016 San Domenico di Fiesole, Italy
Arthur van Soest: Department of Econometrics and CentER, Postal: Tilburg University, P.O. Box 90153, 5000 LE Tilberg, The Netherlands

Abstract: We analyze households' joint investment decisions for financial wealth and homes. We use a bivariate censored regression model with endogenous switching. Fixed costs or transaction costs are captured by an unobserved nonzero censoring threshold. The model allows for spill-over effects of a binding threshold for one asset on the demand for the other asset. We find that tenure choice affects the level of financial wealth. Our results do not support the view that people first accumulate financial wealth before acquiring homes.This can be due to the absence of down payments constraints in the Netherlands.

Keywords: Housing demand; Household saving; Portfolio choice; Limited dependent variables

JEL-codes: C34; D12; G11; R21

28 pages, August 15, 1998

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