Numerous cross-sectional studies of the income elasticity of housing demand have been published in the past twenty years. Despite these many studies, no consensus has been reached. One of our main purpose of this paper is to demonstrate the clear relationship between the income elasticity and age of household head and/or family size, using lifetime income to estimate the income elasticity of housing consumption. So far as we know, no studies used lifetime income to derive the income elasticity of housing consumption. Most of them employed permanent income to estimate the income elasticity.
In general, housing consumption changes with the household's life cycle characteristics, i. e., age of household head and family size. Thus, we categorized the households into 30 age and family size groups (5×6) and calculated their lifetime income to estimate the income elasticity. We used individual household data to control for residential area and occupation of household. In fitting the housing demand equation, we employed both "housing space" and "house value" as the measure of housing consumption.
The main findings are as follows:
(1) the income elasticity of housing consumption in terms of lifetime income rises and falls with age, having the peak value at the middle of household head. (2) family size has a different effect on younger owners and has U-shape effect in the case of older owners. (3) the income elasticity of housing demand in terms of normal income is not necessarily higher than that of current (measured) income when the data are stratified into many life cycle characteristics of household and lifetime income is employed for normal income.
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