Demographic Cycle, Migration and Housing Investment: A Causal Examination
72 Pages Posted: 19 Apr 2016
Date Written: April 2016
We study residential investment over GDP in 20 OECD countries since 1980, and show that it is closely associated with the growth dynamics of population aged 20-49. We develop a new method to uncover the causal effect of the growth of the 20-49 age group. Using past demographic data as an instrument to avoid potential endogeneity between migration and the housing cycle, we find that a 1% increase in the population aged 20-49 increases the residential investment rate by 1.3 pp. Demographic changes are a better predictor of the residential investment rate than any macroeconomic or financial variable we control for.
Keywords: business cycle, housing, demography, migration
JEL Classification: E32, J11, R21
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