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Intratemporal Nonseparability between Housing and Nondurable Consumption: Evidence from Reinvestment in Housing Stock

Khorunzhina, Natalia (2018): Intratemporal Nonseparability between Housing and Nondurable Consumption: Evidence from Reinvestment in Housing Stock.

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Abstract

Using the data on maintenance expenditures and self-assessed house value, I separate the measure of individual housing stock and house prices, and use these data for testing whether nondurable consumption and housing are characterized by intratemporal nonseparability in households’ preferences. I find evidence in favor of intratemporal dependence between total nondurable consumption and housing. My findings indicate the elasticity of intratemporal substitution between nondurable consumption and housing is higher than the elasticity of intertemporal substitution for composite consumption bundles. Moreover, assuming CES utility, my results are indicative about complementarity between nondurable consumption and housing in the intratemporal preferences.

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